Fire & Ice — Oil Up as Americans Freeze

  • As OPEC and OPEC+ reduced production, the supply of crude oil has been tight, which has pushed up oil prices.
  • “We will continue to see these spurts of either very cold or very hot weather that can have drastic and immediate impact on supply, but they don’t tend to be very long-lasting.”
  • There are many reasons behind the bullish nature of oil prices in New York and the U.S.

The price of US crude oil futures rose above the $60 mark to the highest level since January 11, 2020, at $60.95 per barrel. Investors’ hopes for more stimulus measures in the United States, and relaxation of the new coronavirus epidemic lockdown measures, have helped support the rise in oil prices, which rose nearly 5% last week.

Brent crude oil reserve

Meanwhile, an unmanned aerial vehicle carrying explosives launched by the allied Houthis has raised concerns about renewed tension in the Middle East.

Stephen Innes, chief global markets strategist at Axi, said in a note on Tuesday:

“The unexpected U.S. supply disruption provides another short-term price recovery bridge that has likely taken oil prices to a level where markets were eventually heading but just a little bit quicker than expected.”

In recent weeks, as the Organization of Petroleum Exporting Countries and the Organization of Petroleum Exporting Countries and their allies (OPEC+) reduced production, the supply of crude oil has been tight, which has pushed up oil prices.

“There are some tailwinds behind oil prices at the moment,” said Fiona Boal, Head of Commodities and Real Assets at S&P Dow Jones Indices LLC.

“We will continue to see these spurts of either very cold or very hot weather that can have drastic and immediate impact on supply, but they don’t tend to be very long-lasting.”

There are many reasons behind the bullish nature of oil prices in New York and the U.S. However, one of the most prominent reasons is that the U.S. is now becoming the new world leader in offshore drilling. It has become so due to various reasons.

One is that the U.S. economy has been recovering very well from the recession and is in fact expected to grow very well in the coming years. Consequently, it is now providing the world with oil and gas supplies at a much cheaper rate than anywhere else in the world. The U.S. also leads the world in terms of its production, and hence its oil price.

Crude oil drilling

The U.S. also sees a lot of potential in oil and gas as a source of fuel. Currently, the U.S. is one of the largest producers of crude oil, second only to Russia.

If oil prices continue to stay at current levels, then there is no doubt about the U.S. becoming the world’s leading exporter of crude oil.

The level of optimism of the oil traders about an oil price near $60 a barrel is quite high. In fact, many traders believe that an oil price near that level would be very good for them.

The optimistic sentiment is due to the high expectation that the market will be able to sustain such high prices. According to the speculators, if oil prices reach that level, they will earn a profit by selling more contracts.

Doris Mkwaya

I am a journalist, with more than 12 years of experience as a reporter, author, editor, and journalism lecturer." I've worked as a reporter, editor and journalism lecturer, and am very enthusiastic about bringing what I've learned to this site.  

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