Gas prices aren’t cooling off.
Last checked, crude was up another 41 cents to $84.17 – and could run back to $100+.
Worse, according to President Biden, “My guess is you’ll start to see gas prices start to come down as we get by and going into the winter, I mean, excuse me, next year, going into 2022. I don’t see anything that’s going to happen in the meantime that’s going to significantly reduce gas prices,” as quoted by CBS Baltimore.
While some blame OPEC’s failure to boost oil production, others blame President Biden, who canceled the Keystone XL Pipeline in his first few weeks in office.
Supply-demand issues aren’t helping.
For one, markets are going to remain under-supplied for quite some time.
Meanwhile, analysts believe oil demand will go back to – and even exceed pre-COVID levels. “Bullish sentiment continues to support oil prices as global supply remains tight at a time when demand is recovering from the pandemic,” said Toshitaka Tazawa, an analyst at Fujitomi Securities, as quoted by CNBC.
Even worse, stockpiles at storage tanks if Cushing, OK are critically low.
In fact, over the last two weeks, stockpiles fell by more than four million barrels to 31 million, and may drop even more on growing demand. The last time supply was this low, oil prices were above $100 a barrel.
“Crude oil could justifiably trade to the next level higher on the storage drought at Cushing alone,” said Bob Yawger, director of the futures division at Mizuho Securities USA, as quoted by Bloomberg. “Forget about fuel switching, whether OPEC+ adds additional barrels, or dollar weakness: if Cushing continues to slide, it could get ugly quickly.”
With prices only rising, it may be time to walk or bike to work.
Or, just close your eyes and pump at the gas station. Prices may only rise.
Or, as we noted last week, take a look at oil dividend-payers:
ONEOK Inc. (OKE) – which pays a yield of 5.74%
Exxon Mobil (XOM) – which pays a yield of 5.48%
Valero Energy (VLO) – which pays a yield of 4.84%
Phillips 66 (PSX) – which pays a yield of 4.42%
The post This is Why We Could See the Return of $100+ Oil appeared first on Morningology.
