Crude oil saw its highest prices in the last few years as the world remains on track to pre-COVID normality.
On June 7, U.S. West Texas Intermediate (WTI) was just over $69 a barrel. The day before, the US benchmark traded above $70 a barrel — its highest since October of 2018. In April of 2020, one of the pandemic peaks, WTI fell to a negative $37.63 per barrel. The $70 mark is $110 a barrel above that record low.
“Oil demand has been rising this year, and many traders have bet on the expected summer uptick, buying oil at cheaper prices before and now reaping the profits,” analyst Louise Dickson of Rystad Energy told Reuters. “The strong levels are here to stay.”
Brent crude showed impressive numbers, too. It reached $72.27 per barrel, the highest since May 2019.
According to CNN Business, the bounce back is driven by the recovery in demand for gasoline and jet fuel as the pandemic dwindles and the economy returns to form.
The Organization of the Petroleum Exporting Countries (OPEC) and Russia are restraining supply as well, according to CNN, although they plan to pump more in the coming months.
“An improvement in India Covid-19 case numbers and the ongoing recovery in the US and Europe ahead of their summer is supporting prices,” wrote Jeffrey Halley, senior market analyst for Asia Pacific at Oanda. “OPEC+ is content to postpone tinkering with their production targets for now.”
Americans are feeling the higher oil prices at the pump, too. On June 7, the average gallon of regular gas in the U.S. was $3.053 — up from about $2.02 a year ago.
In Louisiana, it was at $2.709 a gallon in June.
According to some experts, the weather will also play a factor in gas prices staying high.
The natural-gas market “may get even tighter by the end of the year,” Christin Redmond, global commodity analyst for Schneider Electric’s Energy & Sustainability Services, said in a Barron’s article.
“Weather has been overall supportive, coming out of the coldest winter for a couple of years, and this summer looks like it will also be quite hot,” she said.
High temperatures lead to more air-conditioner use, boosting demand on gas-fired generators, according to Barron’s.
“The Atlantic hurricane season officially began on June 1, with the U.S. forecasting a likely range of 13 to 20 named storms this year. Hurricanes have a much smaller effect on oil-and-gas markets than they did a decade ago, with a much smaller portion of natural-gas production coming from offshore drilling, but they can temporarily reduce supply by around two billion cubic feet a day and knock out some liquid natural gas (LNG) export volumes,” reads the Barron’s article, citing Redmond.
With over 90 percent of the 11 billion cubic feet per day of U.S. liquefied natural gas export capacity being located on the Gulf Coast, Redmond said, “hurricanes have the potential of being net bearish” for prices.