The international price of crude oil has rallied a few dollars this week to more than $50 a barrel. The question is whether that is a sign of momentum, of a rebound in price after a yearlong plunge.
This week brought evidence U.S. drillers and frackers are starting to cry “uncle.” Low prices have them cutting production. The number of active drilling rigs is down, as are barrels of crude produced. It’s arrived. Oil rigs are down and so are barrels produced.
“It’s the first really strong signal that the market is going to face a turnaround in the fundamentals,” said Ann-Louise Hittle, head of macro oils at the consultancy Wood MacKenzie. “We’re going to start to see a tightening of supply in 2016.”
Hittle also predicted a boost in world demand, higher world demand, especially from U.S. customers.
One large and unpredictable factor, though, is Iran. The country is likely to export more oil as international sanctions lift. What’s unknown is how much and how soon.
“Over the next few months, you are going to see north of half a million barrels a day of Iranian crude coming to the market,” said Seth Kleinman, head of energy strategy at Citigroup. “And I don’t see how that doesn’t move the needle lower.”
Here’s where they both agree: If the prices rise enough, to say $60, many drillers in North Dakota and Texas will pump again. And more oil in the world would pressure prices back down.
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