Oil Prices Rebound – Charles Reed Cagle Weighs In
After a small wobble over the COVID delta variant, oil prices are rebounding and continuing to stabilize, says Charles Reed Cagle. In early July of 2021 oil hit a peak of more than $77 per barrel – the highest oil prices have been since late 2018. Current prices are hovering around $65 to $69 per barrel.
Oil Inventories Are Up Says Charles Reed Cagle
Last week, crude oil rose 806,000 barrels while gasoline inventories rose 3.3 million barrels according to the American Petroleum Institute. Charles Reed Cagle says that if these numbers are confirmed by the government, this would indicate the end of an 8-week decline in inventory, causing a drawdown for both commodities. Higher inventory means it’s easier to meet demand, which lowers prices.
COVID Is Causing Concern
Cagle was skeptical that oil prices would stay stable for long in this current political and health environment. Until COVID delta concerns are addressed, it’s hard to imagine that oil prices will stabilize, he says. While industry experts don’t expect the delta variant to interfere with global growth, there will certainly be regional upsets as supply chains are disrupted.
OPEC+ Is Boosting Oil Supply
On top of these conditions, the Organization of the Petroleum Exporting Countries and allies (OPEC+) is adding pressure by boosting the oil supply. The OPEC+ ministers made an agreement to boost oil supply from August, says Charles Reed Cagle. This will unwind some of the supply curbs that were put up in response to COVID-19 in mid-2020. This will help lower prices that reached a two-and-a-half-year high during the pandemic last year.
Demand Increases as Economy Recovers
While most of us appreciated the lower gas prices during the pandemic, it’s important to remember that they crashed in response to the economy tanking, says Charles Reed Cagle. During the pandemic, people weren’t able to travel, locally or internationally, supply chains were interrupted, factories ground to a halt–all of this lead to a drop in demand for oil.
As demand for oil goes up, so too do oil prices. It’s a sign that the economy is recovering. While the delta variant is causing concern, we can expect to see oil investors holding their breath. But it’s unlikely that we’ll see a crash like the first days of the pandemic.
Charles Reed Cagle has been involved in the energy industry for over 35 years. He consults with several midsize independent oil companies, helping them to streamline their business operations and guiding them into lower risk horizontal plays.
