Oil prices have averaged nearly $ 40 a barrel over the past three months, and prices are expected to improve after a vaccine is distributed, but experts from the Federal Reserve Bank of Dallas believe that it will be necessary to wait until the beginning of 2022 until the oil glut is eliminated. .
Brent, the international benchmark, averaged $ 41 during the first half of November, according to the Dallas Fed’s Energy Indicators report. The price of oil in Midland – closer to wells in the Permian Basin – averaged $ 39 a barrel. In Houston, an export and refinery hub, West Texas oil cost an average of $ 40 a barrel.
Two main factors are holding back oil prices, Dallas Fed Chairman Robert S. Kaplan said at a virtual conference hosted by the Federal Reserve Bank of Dallas and the Federal Reserve Bank of Kansas City. Global markets are still functioning on supplies that flooded the market in the spring when Saudi Arabia and Russia launched a price war as demand began to crumble.
In addition, people still drive airplanes less and less, lowering the demand for gasoline and jet fuel. Driving activity is down 88% from a year ago, Kaplan said, while the Houston airport system estimated that the number of Thanksgiving travelers at Bush Intercontinental and Hobby airports decreased by half this year.
BECOME SMALLER: Expect more consolidation in the oil and gas industry
Kaplan said activity and energy demand will increase next year with the distribution of COVID-19 vaccines. “We are going to eliminate excess stocks and that will have a positive effect on oil prices,” he said.
The promise of a vaccine has driven up oil prices over the past week. Oil settled above $ 45 a barrel on Wednesday for the first time since March.
The number of US oil and gas rigs has recovered with oil prices. The number of drilling rigs in service fell 69 percent from a high in early January to a low of 244 in early August. The number of rigs this week reached 310, up 10 from the previous week, Houston oil services firm Baker Hughes reported.
The demand for fossil fuels will remain large over time, Kaplan said, but fossil fuels will represent a smaller percentage of total energy use as wind, solar and battery technologies advance.
“There will be a healthy oil and gas industry for years to come,” Kaplan said, “but it will be more consolidated.”