Crude oil prices continued to increase this week, with WTI at Cushing closing Tuesday at $84.65/bbl, the highest level since October 13, 2014. The rise in crude since the spring of 2020 has been swift and almost relentless, interrupted only by pauses at $40, $60, and $70, when the market took breathers and seemed to say to itself, “We’re not done yet, right?” The question now is, can anything stop WTI from topping $90 and yes, the magic $100 mark — something that few would have predicted we’d see again so soon . The reality is, there are many factors driving crude prices higher but few holding prices down. In today’s RBN blog, we discuss what’s driving the rapid run-up in oil prices, whether $100/bbl WTI is a sure thing, and what happens if — when? — oil hits triple digits.
A year and a half ago, against the backdrop of the huge run-up in crude supplies precipitated by the Shale Revolution and capped by the fastest and most severe crude oil demand destruction ever, WTI traded at a negative $37.63/bbl. Barring the physical collapse of the universe, Armageddon, or nuclear catastrophe — pick your poison — it was safe to say the day after April 20, 2020, that oil prices had nowhere to go but up. It was just a matter of how quickly the price of crude would rebound and how high prices would rise before they settled into something approaching an equilibrium, a new range within which the U.S. and the wider world would be producing enough oil to meet its needs. As shown in Figure 1, crude prices returned to $40/bbl in what now seems like a flash, mostly thanks to a flurry of domestic production shut-ins and an OPEC+ production-cap agreement that went into effect in May 2020.
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