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WTI Price Breaks $70 For First Time Since 2018

West Texas Intermediate hit the highest since 2018 at the end of last week amid an increasingly favorable demand outlook.

The U.S. benchmark topped $70 a barrel on Friday before retreating slightly, and Brent crude spiked over $72 a barrel during the session.

Demand for oil is expected to rebound strongly this year, according to bank analysts and the head of the IEA, Fatih Birol. Meanwhile, the prospect of Iranian oil beginning to flow freely into markets has dimmed somewhat, according to a Mizuho executive.

“There’s plenty of room for upside here,” Bob Yawger, head of the futures division at Mizuho Securities, said as quoted by Bloomberg last week. “Summer and the reopening of the economy is bullish for demand” and “it looks much less likely we’ll have Iranian barrels any time soon than it did last week.”

The supply-side dynamics also offer reasons for bullishness. Excessive global oil stocks have been drained, and now there’s even talk of a shortage.

“The world risks a severe deficit of oil and gas,” the chief executive of Russia’s state-owned energy behemoth Rosneft said this weekend at the St. Petersburg International Economic Forum. “The world consumes oil but isn’t ready to invest in it.”

“Oil consumption will continue to grow despite a relative drop in its share in the global energy mix,” Sechin also said during a panel.

Judging by the latest price movements and the fact that the IEA revised its expectations for oil demand recovery radically, now expecting it to reach pre-pandemic levels within a year rather than in two years.

This is the same IEA that said investments in new oil and gas exploration need to end this year if the world is to reach its net-zero goals. In response, Russia’s Deputy Prime Minister Alexander Novak said this could bring oil prices to $200 per barrel.

Such price levels are hard to imagine right now. Still, an oil price of over $75 or even more per barrel for Brent has just become a lot more realistic than it was only a month ago.

By Irina Slav for Oilprice.com

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Leave a comment
  • Anton Sartor on June 07 2021 said:
    Soon we will be breaking the $80 barrier and $100 by year end.
  • Mamdouh Salameh on June 07 2021 said:
    With WTI crude price topping $70 a barrel, one thing US oil drillers should guard against is the temptation of going back to the bad old habits of reckless over production.

    If shale oil drillers ever try again to undermine OPEC+’s policies to support oil prices and stabilize the market by reckless overproduction, OPEC+ will go for a strategy of expanding its market share thus causing prices to fall below the breakeven price of most shale oil producers.

    Brent crude could hit $70-$80 a barrel much earlier than my earlier projection that this will happen in the third quarter of this year. This is underpinned by the virtual return of the global economy to normalcy, the disappearance of the oil glut in the market, OPEC+ disciplined production cuts and the fact that the world’s largest two economies, China and the United States are pushing prices and demand in the right direction.

    Moreover, the global oil demand is virtually back to pre-pandemic level despite the IEA telling us repeatedly that this isn’t going to happen until the end of 2023. The IEA is now saying that global oil demand will be back to pre-pandemic level by the end of 2021, two years earlier than it was predicting.

    The market could face a supply deficit estimated at 10 million barrels a day by the end of 2022 or early 2023 because of reduced investments in oil and gas projects with Brent crude surging towards $100 oil.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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