Brent crude surged to levels not seen in two months on Monday, as easing COVID restrictions in China’s biggest cities drove fresh hopes for demand.
U.S. markets will be closed on Monday in observance of Memorial Day.
Read: Here are all the market closures for Memorial Day
West Texas Intermediate crude for July delivery
rose 61 cents, or 0.5%, to $115.65 a barrel. On Friday, WTI climbed 0.9% to close at $115.17 a barrel on the New York Mercantile Exchange, the highest close for a front-month contract since March 11, according to Dow Jones Market Data. It was the fifth straight week of gains for the U.S. benchmark, which gained 4.3%
July Brent crude
rose 50 cents, or 0.6%, to $120.03 a barrel, a level not seen since early March. On Friday, Brent finished 1.7% higher at $119.43 a barrel on ICE Futures Europe, its highest front-month close since March 25.
rose 0.4% to $4.0333 a gallon, while June heating oil
was up less than 0.1% to $4.005 a gallon.
July natural gas fell
rose 1.1% to $8.831 per million British thermal units.
Climbing Brent prices came after Beijing relaxed pandemic restrictions on Sunday, declaring a recent outbreak under control. Officials have also gradually been easing restrictions in Shanghai, which has endured a two-month lockdown. China is the world’s biggest importer of oil, and the market has been concerned about demand hits to the commodity.
“Having broken above resistance-turned-support at $115, Brent may now take aim at $124,” Ole Hansen, head of commodity strategy at Saxo Bank, told clients in a note.
Not all are as optimistic. Commerzbank recently lifted Brent oil prices to between $100 and $115 per barrel in the current quarter, but sees a pullback in the second half of the year. They see the release of western oil reserves and increased buying of Russian oil by India and China to cushion the loss of Russian oil supplies to Europe potentially weighing on prices.
The already more liquid August Brent contract was trading around $116 a barrel, also at a two-month high, noted Commerzbank analyst Carsten Fritsch, in a note to clients on Monday.
While optimism surrounding China’s COVID outbreak has driven around a 6% gain for Brent since the middle of last week, the risk of renewed lockdowns remains a risk for oil, he said. With China “willing to lock down entire megacities in response to even small outbreaks…It is too early therefore to sound the all-clear completely.”
A fresh catalyst for energy markets could come this week when members of the Organization of the Petroleum Exporting Countries and non-members including Russia, will hold a virtual meeting to discuss production plans.
Meanwhile, EU ministers will return to the table in Brussels on Monday to discuss a possible ban on Russian oil, as punishment for its invasion of Ukraine nearly four months ago. That’s a day after ministers failed to reach an accord. A compromise, affecting just seaborne shipments, but not pipeline deliveries has been met with resistance by Hungary, noted Fritsch.
“If any such watered-down oil embargo is put in place, Russia is unlikely to find it all that difficult to sell its oil to other consumers, primarily in Asia, meaning that the effects on the oil market should be limited. All in all, the latest price surge thus appears excessive to us,” added Fritsch.
The U.S. benchmark’s highest finish in more 11 weeks on Friday came as summer driving season kicked off over the Memorial Day weekend, and inventories remain at low levels. Headed into the holiday, the U.S. average retail price of regular gasoline was $4.59 per gallon), the highest inflation-adjusted (real) price since 2012, according to the U.S. Energy Information Administration.
Read: Sky-high gas prices aren’t stopping Americans from hitting the road this summer