Oil Prices Move Higher As Investors Feel More Confident About Pandemic, Economies

While the pandemic continues to grab headlines in the U.S. and internationally, it’s improving economic conditions that have the eyes of oil investors. According to Gasbuddy’s Patrick DeHaan, oil prices continue to move higher, trading near 2021 highs in Monday’s action, with a barrel of West Texas Crude trading for over $75. DeHaan says the biggest concern pushing those prices up is a lack of production to meet growing demand as economies across the global look to stretch their legs. DeHaan noted a side effect of less oil production, is a significant drop in natural gas production, which he says is being felt more severely overseas.

“Basically all forms of energy are seeing a resurgence in price, from coal to natural gas to the price of oil and gasoline as the result of a continued recovery in global demand.  Now in the U.S., at least gasoline demand is weakening but not necessarily diesel demand which is more of a staple of commerce, whether its trucks, cargo ships, generally use that heavier oil, and so at least for now, while gasoline demand in the last week did perk up slightly in the U.S., globally there still is strong demand as countries do, now, continue to see improvement in the pandemic.”

DeHaan added U.S. oil inventories have now declined for seven straight weeks, which is also helping push oil prices higher. He added that trend of decreasing inventories may continue as the country heads into the heating oil season.

“It’s quite surprising we’re looking at such a bullish demand right now for the price of crude oil.  Goldman Sachs raising its target on WTI to potentially $90 per barrel.  And it looks like the imbalance between supply and demand may linger.”

DeHaan said some counts indicate the number of U.S. oil rigs is increasing, and while that may help alleviate pressure into the future, DeHaan says investors are wrestling with the fact that production is lagging behind demand.

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