(Bloomberg) – Brent oil hit $110/bbl for the first time since May as prospects for imminent supply relief dwindle, prompting traders to ramp up bets on higher prices ahead of the weekend.
The global benchmark rose 3.7%, notching a second straight weekly gain, as bullish sentiment crystallized in the course of a session punctuated by reports of ongoing conflict in major export centers. Iran-backed Houthi rebels continue to pummel Saudi Arabia with missile and drone strikes, while Russia and Ukraine exchange tit-for-tat attacks on energy infrastructure.
The last time prices reached these levels was almost five months ago, when paralyzed global crude and fuel flows spurred a fragile, short-lived agreement that briefly reopened the Strait of Hormuz.
Now, cargo volumes traversing the key waterway are nearing pre-war levels, topping 100 million barrels of crude last week. Still, prices remain stubbornly high, leaving U.S. President Donald Trump with fewer and fewer options to tame energy costs ahead of the Nov. 3 midterm elections.
“After a brief reprieve, the oil market is having to price risk back in, particularly heading into the weekend,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Group.
Diesel and gasoline futures also rose. Diesel settled at $4.90 a gallon in New York. Contracts for both commodities are trading at the highest-ever levels seasonally.
U.S. lawmakers introduced a bill Friday to block Trump’s deal with Moscow to release several hundred million barrels of diesel. Trump has reiterated that Moscow will follow through with a diesel release. But ongoing strikes like the recent attack on Russia’s Ryazan refinery reported by Reuters are amplifying doubts about whether the agreement will deliver as promised.
Analysts are closely watching developments in the Persian Gulf for any signs the conflict is worsening. “The conflict is likely to escalate,” Eurasia Group analysts wrote in a note, raising their odds of intensification to 65% from 35%. “The standoff status quo is no longer sustainable for the U.S.”
The U.S. has also sought to tame prices by drawing from emergency stockpiles and lobbying other nations to do the same. On Friday, the U.S. offered up to 17 MMbbl from the Strategic Petroleum Reserve.
Crude is up more than 75% this year as the wars in the Middle East and Russia disrupt supplies. Physical markets continue to signal tightness as refined products such as diesel have rallied even harder, with European futures for the commodity up more than twofold this year.
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