Oil extends four weeks of gains amid tight supply

Oil extended four weeks of gains amid tight fuel supplies and a weaker dollar, though elevated prices are fanning concerns that the world economy may be heading for a recession.

West Texas Intermediate futures topped $111 a barrel while gasoline and diesel prices have rallied to records ahead of the start of the US driving season in about a week. The prompt spread for Brent crude jumped to a seven-week high, with crude supplies constricted by the boycott of Russian shipments, and product markets strained as refining capacity fails to keep up with rebounding demand.

The rise in energy costs has contributed to rampant inflation, prompting central banks to raise rates and stoking investor concern growth will slow. The Biden administration is considering tapping a little-used emergency diesel fuel reserve to mitigate the supply crunch amid Russia’s invasion of Ukraine, according to a White House official.

The head of the International Energy Agency and India’s oil minister, speaking at the World Economic Forum in Davos, issued warnings on the risk of high prices.

“We may see prices even going higher, being much more volatile and becoming a major risk for recession for the global economy,” IEA Executive Director Fatih Birol said in an interview with Bloomberg TV from Davos.

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