Oil prices rallied to their highest since March amid tighter supplies, the EU considering a ban on Russian crude and China easing its lockdown in its largest commercial city, signalling an anticipated pick-up in fuel consumption.
Brent, the benchmark for two thirds of the world's oil, was up 1.73 per cent at the end of trading on Friday to $119.4. This is the highest rebound since the benchmark hit nearly $140 in March.
West Texas Intermediate, the gauge that tracks US crude, gained 0.86 per cent to $115.07 a barrel at the end of trading on Friday, marking its fifth consecutive weekly gain.
"The Opec+ meeting is the key event to watch next week but, even if we get a commitment to increase targets — which is unlikely — that will only likely increase the amount to which they’ll fall short of them," said Craig Erlam, a senior market analyst at Oanda.
The Opec+ alliance, led by Saudi Arabia and Russia, is set to meet on June 2 and "is unlikely to take any heat out of the market for the foreseeable future", Mr Erlam said.
On Friday, the Group of Seven urged Opec to boost their oil output.
“We call on oil and gas-producing countries to act in a responsible manner and to respond to tightening international markets, noting that Opec has a key role to play,” G7 ministers said in a communique at the end of their talks.
“We will work with them and all partners to ensure stable and sustainable global energy supplies,” the statement added.
"We will act in solidarity and close co-ordination in the event of potential supply disruptions and will do what is needed to mitigate the impact on our economies and citizens, especially in order to protect vulnerable groups."
Opec+ cut output during the Covid-19 pandemic but has been restoring it production gradually at about 400,000 barrels a day each month. Opec+ is expected to stick to plans to raise production by only 432,000 barrels a day when it meets this week.
Last week, at the World Economic Forum in Davos, Switzerland, Prince Faisal bin Farhan, Saudi Arabia's Foreign Minister, said the kingdom's "assessment is that actually oil supply right now is relatively in balance — there is no shortfall of oil”.
“We have to be sure that while we transition to a renewable future, there is enough energy in the market," Prince Faisal said during a panel discussion at the summit. "The kingdom has done what it can. Opec as a whole has done a lot to make sure that the oil markets are stable.
“It’s much more complex than just bringing barrels to the market."
The G7 call on Opec and its allies comes against the backdrop of rising inflation that hit a 40-year high in the US and the UK, as well as a record level in the euro area.
Higher energy prices, along with the war in Ukraine, have fuelled a rise in food costs and commodity prices globally, worsening inflation.
Global food prices reached their highest ever level in March 2022 before edging lower in April, according to the UN Food and Agriculture Organisation. The FAO's food price index averaged 158.2 points in April, down 0.8 per cent from the surge in March, but remained nearly 30 per cent higher than in April last year.
Oil prices climbed higher last week as the EU, which is heavily dependent on Russia's energy resources, is working to impose a ban on oil imports from the country. The world’s largest trading bloc plans to ban Russian oil over the next six months and refined fuels by the end of the year.
Both Brent and WTI benchmarks have gained more than 70 per cent since last year on supply concerns, the Ukraine war and improved demand as global economies recover from the coronavirus pandemic.
China, the world’s second-largest economy and biggest importer of energy, has begun to ease Covid-19 restrictions as infection numbers in the country decline. It plans to reopen shopping centres and shops from June 1 in Shanghai, the country’s commercial centre.
In the US, demand is growing faster than production, which has reduced inventories by 1 million barrels compared with analyst expectations of a 600,000-barrel decrease, according to the Energy Information Administration’s latest weekly report.
Last week, the Institute of International Finance also cut its forecast for global growth to 2.3 per cent in 2022, compared with an earlier 4.6 per cent estimate.