Oil demand continues to rise:
Global demand is indeed quite strong at the moment, especially in China which has been refining heavily during the first four months of the year. Despite the spread of the Indian variant, investors are optimistic about the outlook for demand and some analysts are predicting that $80 a barrel will be reached soon.
Also at issue is the decline in international oil inventories, which also support the black gold. Indeed, last week, the IEA explained that the surplus of oil put in reserve because of the pandemic has disappeared.
Remember that last year at the same time, oil consumption had fallen by 30%, in full containment. Stocks had risen to historic levels due to a small adjustment in production.
In the US, inventories were so high that crude prices even went negative. Indeed, some market participants who did not have additional storage capacity paid investors to get rid of their soon-to-expire futures contracts and not receive physical delivery.
Still low production in the US:
Another factor that is currently driving up crude oil prices is that black gold production remains relatively low thanks to the efforts of OPEC and its partners who have contributed to this bullish recovery by reducing their production to avoid flooding the market. In the U.S. in particular, oil production is struggling to recover with only eight additional drilling wells in the U.S. according to the latest Baker Hughes count on Friday, a total of 352, below the level needed to maintain or increase production.
Finally, oil is also benefiting from inflationary pressures as investors are currently buying many commodities to protect themselves from inflation, which are enjoying a new craze.
Of course, this rise in crude oil prices is already impacting fuel prices, which is also increasing inflation. In addition, the Colonial Pipeline hack last week has already pushed gasoline prices to $3 a gallon, the highest since 2014 before the oil counter-shock.