What's Pushing Oil Toward $100 a Barrel

A few days ago, oil prices exceeded $90 per barrel. Presumably, another upward spiral was triggered by the escalation of the conflict between Israel and Iran. Attacks by rebels on tankers in the Red Sea have forced carriers to seek alternative costly routes, delaying shipments, while OPEC+ reiterated adherence to its production cut policies. So, finally, we began seeing traditional geopolitical factors normally heavily affecting the oil price to have been overshadowing all other considerations. However, fundamentally, the reasons behind this sequential price spike are linked to global supply disruptions, while the rise in the price of commodities may instigate acceleration of inflation.

Another important factor is Mexico's decision to sharply cut crude exports is adding to market tensions, forcing refineries in the U.S. to recall back oil that could have gone for export. In addition, U.S. sanctions seemingly curbed Russian maritime cargoes, with Venezuelan oil being next in line.

These factors have added up to a massive supply disruption that has caught traders off guard. Moreover, the summer road-trip season in the U.S. is ahead: increased demand for gasoline amid an already deep crisis could push the price of Brent crude to $100+ a barrel for the first time in nearly two years. Although some analysts doubt the current oil price rally is sustainable, in case USD remains soft, the oil momentum may convert into a real bull rally.