The start of 2021 has brought a surge in oil prices, with crude finishing the first full week of January above $52 a barrel, the highest price since before the pandemic started last March. On Friday alone, crude rose nearly $2 as the market reacts to a Covid-19 vaccine rollout and an impending change in leadership in D.C.
Phil Flynn, market analyst at the Price Futures Group, says there are multiple factors at work in the price increase. "The market is getting very optimistic that oil demand in 2021 is going to surge as more vaccines become available to the public," he tells KTRH.
The market is also pricing in weaker production due to the Biden administration's energy policies. "We're going to see a lot more regulations come down the pike, maybe very quickly with executive orders, that could slow the rebound in U.S. oil production," says Flynn. "That means we're probably not going to see oil supplies back up to where they were, which means we'll probably see higher prices in the new year, and more dependency on oil overseas."
Those higher prices are already happening. Texas gas prices are about to surpass the $2-per-gallon mark for the first time since last March. "But that's not all bad news," says Flynn. "Part of that is because people hopefully will be getting back to work, we'll be beyond the coronavirus, hopefully we'll get those vaccines out there, and things will be getting back to normal."