QUALITY STOCK ARTS - STOCK.ADOBE.COM PHOTOEnergy analysts are predicting that oil prices may soon exceed $100 a barrel for the first time in more than a year.
The price of Brent crude, the international benchmark, has gained about 30% since July, trading at about $96.50 per barrel Sept. 27, according to reporting by The New York Times.
Robert McNally, the president of research firm Rapidan Energy Group, was quoted as saying prices are going to “melt up,” referring to a run-up in the price of crude.
A driving force behind the increase is a deep reduction in Saudi oil output. The kingdom’s “ability and willingness to add and subtract supplies gives it substantial sway over the market,” the Times reported.
Higher oil prices increase energy costs for individuals and businesses, which impacts the global economy. In the United States, the price of crude accounts for about half the price of a gallon of gasoline. Rising gas prices also complicate the Federal Reserve’s attempts to temper inflation.
The Saudi-led OPEC Plus, which includes Russia, is reportedly withholding more than 5 million barrels of oil per day, about 5% of the global supply, prompting investors to accuse the Saudis of starving the market.
Even if OPEC Plus begins unwinding the cuts next year, some analysts expect that oil stocks will be “uncomfortably low,” increasing the risk of price volatility. The Saudis have also said the current cuts will extend through the end of the year, and Russia promised a reduction in exports of up to 300,000 barrels a day. According to the NYT, the International Energy Agency estimates that Russia had $17.1 billion in oil export revenues in August, the highest monthly total in nearly a year.
Despite the surge in prices, U.S. shale companies aren’t in a hurry to expand drilling efforts, according to The Wall Street Journal. In past years, frackers flooded the market with crude oil to alleviate pressure, but this time around oil prices could remain high until another source adds production.
