Well, it took a hot war in Europe, constrained capital spending by U.S. producers, continued restrictions in OPEC+ production, and ongoing economic recovery from a global pandemic, but it’s finally happened: Brent shot past $100 and even $105/bbl Thursday before dropping in the last hour of trading to settle a hair above $99. Even WTI touched $100/bbl briefly. The market has been buzzing about the prospects for the breach of this threshold since October, coming along with waves of speculative trades, a dozen false starts, and countless pundit predictions. Now that it has happened, what does it mean — other than higher gasoline prices, of course? In the good ole days, high prices would spur production growth that would help bring prices back down — eventually. But this time, things are different. Which begs the #1 question: Will triple-digit oil prices last? In today’s RBN blog, we’ll consider these issues in the context of historical price behavior and what we might expect this time around.
It would be impossible — and, frankly, wrong — to discuss yesterday’s surge in crude oil prices without first pausing to acknowledge the terrible human tragedy unfolding in Ukraine. We are living through a defining moment in history, and our hearts are with those fighting to defend freedom.
It was more than seven years ago, on September 5, 2014 — a few months after Russia invaded Ukraine’s Crimean Peninsula — that Brent last settled above $100/bbl (yellow “blast” icon to left in Figure 1). Brent had averaged $110/bbl for the previous four years. After the crash of late 2014 took Brent down to $55/bbl by year’s end, the price of Brent then averaged $55/bbl for the next six years (dashed gray line). The crude oil benchmark hit rock bottom on April 21, 2020 (red blast icon), the day after WTI famously went negative, down to minus $37.63/bbl. Since then, it’s been a pretty steep run back to $100+/bbl (yellow blast icon to right) — on Thursday, after rising as high as $105.79/bbl, the Brent April contract settled at $99.08/bbl.
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