Brent crude surged past $98 a barrel on Tuesday, pushing within striking distance of the $100 mark as a confluence of summer demand, Middle Eastern supply risks, and tightening U.S. inventories drove the biggest single-day rally in six weeks.
Brent settled at $98.43, up 3.7%. WTI crude gained 4.1% to $95.86. Both benchmarks have now gained over 12% in the last two weeks, reversing the bearish slide triggered by China demand concerns in mid-May.
The trigger Tuesday was a double-barrel supply shock. A drone strike on Russia’s Gazprom Neft refinery in Moscow knocked out an estimated 150,000 barrels per day of processing capacity. Hours later, Iraq’s oil ministry reported an unplanned shutdown at the Rumaila field — the country’s largest — cutting another 200,000 bpd of production. Traders said the outages hit a market already bracing for peak summer driving demand and low U.S. gasoline stocks.
“The market was already tight heading into June,” said James Harte, chief commodity strategist at StoneX Group. “These outages are pulling forward the supply squeeze we expected in July. If we see one more disruption at this level, $100 Brent is inevitable before the Fourth of July.”
U.S. gasoline futures jumped 4.8% to a five-month high, adding pressure on the Biden administration ahead of the summer driving season. The Biden administration has signaled it is willing to tap the Strategic Petroleum Reserve if prices breach $100, but traders note the SPR is at its lowest level in four decades after last year’s historic drawdown.
