Oil Prices Continue to Advance
This blog recently reported how the Texas oil and gas economy continues to thrive, buoyed by increased production and favorable pricing. Presently, crude oil prices are at the highest level since late 2014. Analysts attribute the price increase to declining US crude inventories and OPEC attempts to push prices higher through production cutbacks. While there is some debate as to whether prices will continue on this trajectory, navigating such market fluctuations requires the advice and counsel of experienced energy sector attorneys.
US Crude Oil Prices at A Glance
Crude oil prices are hovering close to five-year averages, with Brent crude futures reaching $74.74 per barrel, the highest level since Nov. 27, 2014, while US West Texas Intermediate (WTI) crude futures are also hovering at $69 a barrel.
As you may recall, OPEC ramped up production at that time in an attempt to defend its market share, eventually driving the price for Brent to $27 a year later. By 2017, however, OPEC and other major producers began curbing production to rein in oversupply and prop up prices. Some observers argue that the Saudis are aiming prices in the $80 to $100 a barrel range, and that Riyadh will not pursue changes to the OPEC supply pact agreed to in 2017. The Saudis are driven by domestic political and economic concerns as higher oil prices will support their fiscal positions and the Kingdom’s costly reform program. Saudi Arabia has previously acknowledged that it is crucial to diversify its economy away from oil and gas production.
Can the Oil Bull Market Last?
Since supply cuts were instituted in 2017, US crude inventories have declined from record highs, settling back to long-term average levels. According to the Energy Information Administration (EIA), crude oil stocks are close to the five year average of 420 million barrels. The decline in inventories has boosted prices and geopolitical tensions in the Middle East region could lead to further supply reductions from the Middle East.
The question remains, however, whether this bull market still has legs. Some analysts argue that prices will level off and that global supply and demand data do not support current pricing levels. Moreover, there has been an uptick in the number of exploration and production wells being drilled in Texas. In any event, the riding the inherent volatility of the energy markets and negotiating favorable oil and gas contracts requires proper legal representation. Contact the Law Offices of C. William Smalling, P.C. today