energy is a major component in headline inflation and a key input for many goods and services meaning higher prices can feed through into core inflation oil prices have surged to the highest levels in three months as the economic outlook improves and supply cuts from some of the world’s biggest producers start to bite some analysts believe benchmark crudeoil futures are due for further gains and could head toward 100 a barrel after trading within a few dollars either side of 80 a barrel so far this year another move higher would quickly translate into higher gas prices for drivers—and would make life a little harder for officials at the federal reserve and other major central banks who are trying to bring inflation back down to their target levels the most actively traded futures contract for brent the global yardstick for crude oil jumped 13 in july its biggest monthly gain in a year and a half it traded around 8550 a barrel early on wednesday the us equivalent known as west texas intermediate or wti surged nearly 16 last month while both gasoline futures and prices at the pump have also risen changes in both supply and demand are fueling the upswing on the supply side declining inventories reflect recent production cuts from saudi arabia and russia—in contrast to earlier this year when traders and analysts suspected moscow had failed to follow through on an earlier pledge to pump less oil “the market is really starting to respond to the production cuts by saudi arabia” said saad rahim chief economist at trafigura a genevabased commodity trading house at the same time a range of economic indicators is signaling that fears about recession in the us and the eurozone may have been overblown boosting expectations for energy consumption this week the us energy information administration revised its oildemand figure for may to a record high for that month goldman sachs analysts have predicted a record for july saying that strong economic activity in the us and india offset weaker growth in china analysts at société générale say brent crude is likely to reach 100 a barrel next year while their counterparts at standard chartered have a 98 forecast the standard chartered team says oil demand will outstrip supply by 28 million barrels a day this month further boosting oil prices it says the daily deficit is likely to top two million barrels through to yearend barring seasonal disruptions in october caused by refinery maintenance technical factors are also adding juice to the rally investors and analysts say until recently crude futures showed the deepest netshort positioning since 2016 meaning many investors were set up to benefit from cheaper oil but the market has begun to rebalance with some hedge funds unwinding bets on lower prices and others wagering that prices will keep rising further upward pressure on oil would be unwelcome for central bankers energy is a major component in headline inflation and a key input for many goods and services meaning higher prices can feed through into core inflation energy costs of all sorts including motor fuel electricity and piped gas make up nearly 7 of the us consumerprice index “it’ll likely slow the disinflationary trends we’ve seen” said richard bronze head of geopolitics at consulting firm energy aspects “this will be a challenge for central banks” for policy makers “this could mean they wait longer to cut rates if oil goes up and inflation is going back up” said lorenzo di mattia chief investment officer of sibilla capital a macro hedge fund analysts aren’t all as bullish about the outlook for oil prices a recent dow jones survey of 15 banks shows an average estimate for brent at 8714 a barrel by the middle of 2024 not far ahead of current prices one wild card is china recent data suggests the economy is recovering more slowly than expected from covid19 lockdowns but oil imports have rebounded strongly jumping 45 in june from a year earlier to 127 million barrels a day customs data shows some analysts question if crude is being consumed or stored and how long the demand surge could last