Crude and NGL prices hit their highs for 2016, but can this trend continue? Undoubtedly it’s a positive for the oil and gas industry to see crude prices improve, but the key aspect to a possible resurgence is what happens when prices improve above $50/bbl.
It will take a while to achieve balance in the crude, gas and liquids markets, but there is evidence that reduced production is having positive impacts on the market.
The bounce in prices lends credence to the possibility that a floor has been set in the commodities market.
Crude prices experienced another decline the first full week of April as inventory levels remain high, but there was some optimism surrounding the market once again as the U.S. Energy Information Administration (EIA) announced a nearly 5 million barrel (bbl) decline.
Crude oil prices lost some luster this week as the arrival of the spring shoulder season brought a lull in prices and demand.
It’s too early to say if a price recovery has started, but there are hopeful signs.
WTI prices rose above $40 per barrel and helped accelerate gains for NGL and gas prices, but questions remain over whether this rally is real or not.
A surprise comeback by crude oil also spurred gains for NGL prices and left questions over whether it was a signal of a recovery with a floor being set or another false dawn in this down market. In just over a week, West Texas Intermediate (WTI) crude gained nearly $10 per barrel (/bbl) in value to reach its highest level of 2016.
West Texas Intermediate crude prices improved despite record stock levels as the U.S. Energy Information Administration reported that production fell to its lowest level since 2014 the final week of February. The improvement to just under $35 per barrel was supported by continued discussions to freeze current production levels among various oil producing countries.
Crude prices have been improving but the reality may be different than that being perceived by market participants.
The only certainty in the current commodity markets is that things will remain uncertain for the near term.
As uncertainties abound in the crude market, it’s likely that gas and liquids markets could experience more volatility.