Last week saw oil prices trading within a very narrow $1/bbl range, but crude prices have broken higher this week thanks to strongly supportive data from the IEA and OPEC, as well as strong weekly demand reported by the EIA. After trading near $59/bbl all of last week, crude oil surged past $63/bbl on Wednesday.
The IEA highlighted US and China demand as being particularly strong in the second half of the year. The agency raised global demand by 230 kbpd this year. Although that sounds small, that’s an annual increase of 84 million barrels cumulatively. A small daily increase can have a huge impact on inventories over the course of the year. After 2020, global stockpiles have hundreds of millions of barrels to whittle down; increased demand means those inventories will fall farther and faster. Keep in mind, though, that OPEC+ has millions of barrels per day in excess capacity, so increased demand could be tempered with more supply.
On Wednesday, the EIA revealed that fuel demand in the US was solid, with gasoline demand rising to be just shy of 9 MMbpd and diesel moving above 4 MMbpd. Strong demand ahead of the busy summer season suggests the recovery is progressing well. Combined with the IEA’s outlook, the EIA’s numbers gave markets confidence that prices can keep moving higher.
Geopolitics raised their head on Thursday, in both Ukraine and Saudi Arabia. Excessive Russian troop counts near the Ukrainian border are causing alarm for Ukraine and its allies. A conflict there could easy escalate to a broader US-Russia conflict, which could end up more serious than just a border skirmish. In Saudi Arabia, attacks on oil infrastructure continue rising. Yemen rebels are antagonizing Saudi Arabia due to the on-going Yemen War, though the Saudis have attempted to broker a ceasefire. We’ve seen in years passed how an attack on Saudi infrastructure can have devastating impacts. If Yemeni missiles break through Saudi defenses, it could send oil prices rocketing higher.
This Week in Energy Prices
Crude oil prices started off the week low, creeping up slowly throughout the week. Crude oil opened at $59.35, and slowly crept up all week hitting $63.32 on Friday. Friday’s opening price of $63.32 is the highest of a two-week period, further showing that crude oil prices have been trending upward the past month.
Like crude oil, diesel prices have also been increasing this week. The week started off with Monday’s opening price of $1.8073 and steadily increasing all week long. Diesel ended the week on a 2-week opening high of $1.8963, the lowest of the 2-week period having been on April 6th opening at a price of $1.7741.
Following the same trends of crude oil and diesel, gasoline prices this week again had opening prices slightly increasing throughout the week, with the jump from Wednesday to Thursday being the largest difference. Gasoline opened the week at $1.9646, finishing at the end of the week with an opening price of $2.0518.