Brent crude prices hit $60 a barrel for the first time in over a year on Monday, boosted by pandemic-recovery optimism and after President Joe Biden pushed back against immediately lifting sanctions on Iran.
April Brent crude BRN00, +1.26% BRNJ21, +1.26%, the global benchmark, climbed to a session high of $60.27 a barrel, last trading at $60.03, up 70 cents or 1.2%. The contract rose 7.8% last week and settled at $59.34 a barrel on Friday, the highest since Jan. 29, 2020. Based on the front-month contract, prices have now risen seven sessions in a row.
Based on continuous prices, Brent hasn’t touched $60 a barrel since Jan. 24, 2020, according to FactSet. Prices began falling after that point last year as COVID-19 concerns over weak demand began to hit the oil market.
Expectations for increasing demand and production restraints by major oil producers were key to driving prices higher last week.
West Texas Intermediate crude for March delivery CL.1, +1.23% CLH21, +1.23% rose 66 cents or 1%, to $57.52 a barrel. Front-month U.S. benchmark prices gained 8.9% last week, settling at $56.85 a barrel on Friday, the highest finish since Jan. 21.
“One part in the price rise is likely to have been played by institutional investors, whose net long positions likewise increased in the week to 2 February. Institutional investors on the ICE are more optimistic about Brent than at any time in the past year,” said Eugen Weinberg, head of commodities research at Commerzabank, in a note.
But “it is hard to escape the elephant in the room which is that these higher prices could well act as a brake on consumer demand, prompting demand destruction, and snuffing out any nascent recovery,” said Michael Hewson, chief market analyst at CMC Markets, in a note to clients.
“Of course, with these higher prices, the consensus and discipline among OPEC+ members [Organization of the Petroleum Exporting Countries and its allies] could well start to fracture as some countries break ranks to increase production in order to take advantage of this move higher,” said Hewson.
Oil prices rose in step with U.S. stock futures and U.S. bond yields on expectations for more stimulus from Washington. Treasury Secretary Janet Yellen said on Sunday that Biden’s $1.9 trillion relief plan could help restore full employment by next year.
On Sunday, meanwhile, Iran’s supreme leader Ayatollah Ali Khamenei pushed for the U.S. to lift sanctions on his country, according to state television. But Biden said in an interview with “CBS Evening News” that Iran must stop enriching uranium first and stick to its nuclear deal agreements before sanctions are lifted.
Former President Donald Trump pulled the U.S. out of the key nuclear deal in 2018 and reimposed Iran sanctions.