Brent crude could climb to $120 a barrel if the Middle East remains volatile, Jonathan Barratt, Chief Investment Officer at ETO Markets, warned today. That level sits above the current $111.50 technical ceiling and would be a new high since early 2024.
Supply risks are tightening as Houthi rebels target shipping lanes and Saudi Arabia’s output decisions add uncertainty. Barratt said the risk‑premium could stay locked in until the end of the current quarter unless a clear diplomatic breakthrough occurs.
Refining margins are a major catalyst. Diesel crack spreads, though easing from recent peaks, still sit above historical averages. Heating‑oil demand is expected to rise with the Northern Hemisphere winter, keeping the spread tight and feeding broader energy inflation.
Higher energy costs are likely to keep interest‑rate hikes on the agenda for central banks. Barratt noted that bond yields have eased somewhat, but policy makers remain ready to tighten further if inflation persists.
Traders should watch Brent futures on ICE Futures Europe for any break above $111.50, which could trigger another leg up. The outlook remains that prices will stay elevated through Q3, with a gradual easing only tied to a geopolitical resolution.
Investors should monitor the next quarterly reports from major oil majors and the Fed’s policy statements for clues on whether the inflationary pressure will finally subside.