According to analysts from Wells Fargo, crude oil demand remains solid and with the driving season approaching, inventories will stabilize, and prices are likely to rise again.
“Oil prices have come back under pressure the past couple of weeks. The price of WTI oil has slipped below $50 per barrel for the first time since OPEC cut a deal last December to limit production.”
“While OPEC production has fallen by nearly 2 million barrels per day since November, oil inventories have climbed in recent weeks. The relative stability for oil prices in recent months, along with pledges from OPEC and other key oil producers like Russia to cut production, has helped reignite shale production in the United States. U.S. production is up 7 percent since bottoming last July, while inventories have climbed to new record highs.”
“Demand, however, remains relatively solid. The pickup in global industrial production is consistent with increased energy demand. In the United States, consumer usage continues to grow with the number of vehicle miles traveled up nearly 3 percent over the past year.”
“With the spring and summer driving season approaching, our energy team believes inventories that inventories will stabilize and prices should climb again through the summer.”
“Natural gas prices have decreased since the start of the year following mild weather in January and February across most of the United States. However, prices remain up about 50 percent from a year ago since inventories are contracting for the first time in two years.”