Price of oil in the US is on the increase, going as high as $73 per barrel due to the growing tightness of crude supplies in the country. This is coming as several factors are currently influencing the crude market even in recent times. Very prominent among these factors is Hurricane Idah which has been ravaging many parts of the US in the past weeks. Hurricane Idah has had so much impact in the US, especially in the economic sector as it has grounded several activities. For crude installations in the regions affected by the storms, all activities have been halted and personnel evacuated for weeks now bringing oil production to a stop.
This reduction in production levels has led to the US crude experiencing tightness as consumption is increasing while production rates are dwindling. A barrel of oil now sells for about $73 which is quite low. The storms have particularly affected the US Gulf’s offshore oil production since last month. This represents the production of about 1.4 million barrels per day causing prices to soar. The inventory of oil prices in the US has been on a decline and this is the lowest since September 2019. Brent crude prices have however risen by about 1.7%
US-China Trade And Impact On Oil Prices
Meanwhile, while Hurricane Idah’s effect is causing the production of crude to halt, the oil market recently received a lift as talks of the re-opening of trade between the US and China have surfaced. This is coming as a phone call between Joe Biden and Xi Jinping was released online recently. This call has raised hopes for the re-establishment of relations between the two countries. Experts are optimistic that the outcome of this call will bring a boost in global trade and world relations.
Trade relations between the two countries have been strained for a while which has impacted the global market and economic outlook. The impact of this phone call on the oil market is visible as there are projections that renewed bilateral trade would lessen the effect of the recent Hurricane Idah on the US oil market. Amazingly, the impact of the Biden-Xi phone would also reflect on the Organization of Petroleum Exporting Countries(OPEC) as it would lessen the extra supply the body has been providing.
Outlook of the oil and equity markets
Global oil prices and the market, in general, are looking favorable even with the several factors currently influencing the market. Although crude prices have not been stable as they should, market experts are hopeful that renewed talks between China and the US would contribute positively to the market’s positive outlook. The oil market this year has been under pressure since 2020 due to the global economic crises that came with the pandemic. Hopes of market recovery are however in view. However, with the continuous and rising spread of Covid-19 cases, the market increase might come slower than expected and this is according to experts.