Brent crude (CO1:COM) is back at $120 a barrel for the first time since March, while WTI oil contracts (CL1:COM) climbed 1% to $116/bbl, as futures embark on an eighth straight day of gains amid an undersupplied market. The average cost of a gallon of gasoline in the U.S. also broke through the $4.60 level for the first time on Saturday, according to data from AAA. That comes despite raging inflation hitting consumer wallets and 35M people expected to hit the roads for the holiday weekend.
Bigger picture: Memorial Day typically kicks off the start of the summer driving season and peak energy demand season in the U.S. and elsewhere. However, refined product inventories are depleted, with distillate stocks near the 17-year low of 104M barrels seen on May 6, per the U.S. Energy Information Administration. Storage in the U.S. South Central region is also 14% below its prior five-year average despite "strong power burns, narrow summer-to-winter forward price spreads and record LNG demand promising to slow injections." U.S. drilling rigs tick lower, snapping 30-week winning streak.
International challenges are additionally weighing on energy markets, like the ongoing war in Ukraine. While a deal failed to materialize on Sunday, the European Union is attempting to reach an agreement on banning Russian oil ahead of a meeting on a sixth package of sanctions against Moscow. Any further ban would tighten a crude market already strained for supply, but nations like Hungary would have to come aboard after so far refusing to back a compromise (like banning seaborne deliveries of Russian oil while allowing deliveries by pipeline).
Elsewhere: OPEC+ is scheduled to meet on Thursday, but the producer group still looks set to rebuff Western calls for speeding up increases to their oil output. Markets are also on edge after the Iranian Navy seized two Greek oil tankers in retaliation over the confiscation of Iranian oil by the U.S. from a tanker held off the Greek coast. "This raises the specter of further disruptions to oil flows through the Strait of Hormuz, which carries a third of the world's trade," ANZ Research analysts wrote in a research note. Biden hunts for oil refining capacity in America.