Oil futures continued their march higher on Tuesday, pushing WTI crude oil to its highest level since October.
WTI crude oil futures (CL=F) briefly topped $85 per barrel on Tuesday while Brent crude (BZ=F), the international benchmark price, rose above $88 per barrel.
The year-to-date rise in oil prices comes amid rising tensions in the Middle East, drone attacks against Russian refineries, and expectations that OPEC+ will maintain its production cuts at least until June.
Last month, Russia announced it would further its output reductions, prompting JPMorgan analyst Natasha Kaneva to contemplate Brent crude oil reaching $100 per barrel by September.
"At face value, and assuming no policy, supply or demand response, Russia's actions could push Brent oil price to $90 already in April, reach mid-$90 by May and close to $100 by September," Kaneva and her team wrote in a note last week.
Analysts across Wall Street have also been raising their price targets as crude has gained more than 15% this year.
In March, Morgan Stanley strategist Martijn Rats raised his Brent crude price forecast by $10 per barrel to $90 by the third quarter of this year given "tighter supply/demand balances."
Meanwhile, Goldman Sachs analysts last week said, "We continue to expect Brent crude oil prices to remain well supported at the top-end of our $70-$90/bbl [per barrel] range for the remainder of the year.”
The firm wrote, "Ukraine's escalating attacks on Russian oil infrastructure, predominantly refineries, is another source of ongoing geopolitical risk and only exacerbates the present tightness in refined products," adding that "risks to physical oil flows remain high."
Still, Kaneva and the team at JPMorgan expect to see Brent prices trade near current levels into the second half of this year.
"The lesson from the 2022 energy crisis taught us that there are multiple levers that can quite effectively mitigate the impact of the high prices," JPMorgan wrote. "Our view remains that given the US dollar strength and high borrowing costs, oil prices substantially above $90 can cause severe disruptions in the global oil demand — as was the case in March-June 2022 and in September-October 2023 — in turn resulting in lower prices."
The move in oil prices has also led to the energy sector outperforming the S&P 500 so far this year, with the S&P 500 Energy Select ETF (XLE) touching another 52-week high on Tuesday amid a broader sell-off in the stock market.
The energy sector is up 14% so far this year, outpacing the S&P 500's 9% gain. Oil- and gas-related equities were also the biggest winners in the S&P 500 last month.
"Energy stocks are playing catch up and their history points to further near-term gains," wrote Nicholas Colas, co-founder of DataTrek Research, in a client note on Tuesday.
"Oil prices have stabilized, a necessary precondition to sector outperformance. And, should we see a geopolitically-driven oil price shock this year, the group offers a unique hedge against that risk."
Colas noted that when WTI crude prices ranged between $80 and $100 per barrel between 2008 and 2014, XLE typically outperformed.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.
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