Oil Prices Surge as Demand Outstrips Supply

Oil Producers Keep Output Constant Amid Surging Prices

Brent Crude, the international oil benchmark, briefly surpassed $80 per barrel Tuesday before reversing course and dipping into negative territory.

Oil prices have been surging in recent months as demand for crude surpasses supply. Oil demand tumbled last spring as COVID-19 spread across the world. In response, OPEC and its oil-producing allies removed close to 10 million barrels per day from the market. But as demand recovers, some oil producers are still reluctant to increase production,sending crude prices surging.

US Oil Benchmark Rises

It was not only international crude prices that jumped Tuesday. West Texas Intermediate (WTI) crude futures, the US oil benchmark, reached a two-month high before reversing its course.

Oil prices are also increasing in response to the recent spike in natural gas prices. As natural gas becomes more expensive, some utilities companies may switch to oil from gas. As it stands, natural gas inventories are much lower than normal in the US and Europe. As a result, prices are forecast to remain high in the coming months and could spike more if the winter is particularly bad.

US Oil Producers Slow to Open Spigots

OPEC and its oil-producing partners are not the only ones reluctant to increase output. US oil producers are not expected to rapidly boost production after spending the past several years deploying capital discipline to their businesses. Rather, the US shale oil companies are expected to continue to upgrade drilling equipment and complete new wells. Free cash flow from higher oil prices will also go to return cash to shareholders and to expand holdings through mergers and acquisitions.

Rising oil prices and a lack of interest to boost supply is good news for investors in US oil-producing companies, but bad news for almost everybody else.

Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Adviser
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.
SOSS21092903