Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

5 Market Catalysts Driving Oil Prices Higher

By Ellen WaldCommoditiesApr 29, 2021 10:31
5 Market Catalysts Driving Oil Prices Higher
By Ellen Wald   |  Apr 29, 2021 10:31
Saved. See Saved Items.
This article has already been saved in your Saved Items

An array of market developments and geopolitical catalysts are currently moving the price of oil higher. Below, the 5 key triggers:

1. Why Oil Prices Shot Up Wednesday Morning

After barely moving for most of the week, oil prices jumped by at least $2 on Wednesday morning.

Crude Oil Daily Chart
Crude Oil Daily Chart

The reason seems to be based on three factors:

The first is that the build in American crude stocks was well below estimates.

The American Petroleum Institute (API) predicted a 4.3 million bpd build in crude oil stocks in the U.S., but the Energy Information Administration (EIA) report on Wednesday morning revealed only a 98,000 barrel build.

Second, exuberance for summer travel is growing, and there is an assumption that oil demand and jet fuel demand will increase because of this.

Third, Goldman Sachs reiterated its prediction that oil prices will hit $80 per barrel this summer.

2. How India’s Coronavirus Situation Impacts The Oil Market

India is experiencing an exponential increase in coronavirus infections with new lockdowns impacting many parts of the country. India is the third largest petroleum consumer, after the United States and China. It imports almost all of the 4 million bpd of oil it consumes.

There was concern that the situation in India might hurt global oil demand, as lockdowns last spring caused oil demand in the U.S. and Europe to plunge. So far, however, Indian refiners do not plan to reduce their refinery runs substantially.

Rather, Indian refiners see a potential opportunity to export fuel products to other countries in the region if they aren’t consumed domestically, and so do not expect to reduce their demand for crude oil significantly.

3. OPEC+ Decides To Wait And See

OPEC+ was supposed to hold a full ministerial meeting on Wednesday to assess whether to proceed with the production increases it agreed to implement in May at its previous meeting. However, after the Joint Technical Committee (JTC) met on Monday and the Joint Ministerial Monitoring Committee (JMMC) met on Tuesday, the ministers unceremoniously moved their own Wednesday meeting to Tuesday.

Instead of the usual hullabaloo, Tuesday’s ministerial meeting was brief and lacked press coverage. OPEC+ did not change its forecast that demand is expected to rise another 5.9 million bpd this year, and the ministers simply reaffirmed their commitment to raising production 600,000 bpd in May.

OPEC+ plans to meet June 1 to reassess supply and demand, but if the group continues with its current plan, production will increase a total of 2 million bpd by the end of July.

4. Will Rising Gasoline Prices Pressure OPEC+ This Summer?

The question for analysts looking at the market over the next few months is whether an additional 2 million bpd by the end of July will be enough oil for the market. The EIA predicts that U.S. producers will add another 900,000 bpd over the rest of 2021.

However, producers are extremely hesitant to drill new wells in the U.S., even with WTI above $60 per barrel. (I wrote about this in more detail last week, but Wednesday’s earnings call from Bakken producer Hess (NYSE:HES) confirms hesitancy to add rigs this year. Hess is considering adding a third drilling rig in the Bakken if prices remain strong for the rest of 2021).

Many in the U.S. are also predicting that gasoline prices will rise this summer, and they forecast a national average to $3 per gallon. There are also signs that gasoline prices may increase due to issues unrelated to the price of crude oil.

The price of corn is rising, which will cause the price of ethanol to rise. Ethanol is a gasoline additive made from corn in the U.S., and it is mandated by law in most gasoline blends.

Also, a shortage of drivers for gasoline tankers could cause problems with gasoline delivery this summer. Regardless of the reason for rising gasoline prices, U.S. politicians have a habit of blaming OPEC.

In 2018, Saudi Arabia and Russia were receptive to pressure from the Trump administration to increase production when oil and gasoline prices escalated over the summer. Would the Biden administration also pressure them for lower prices, and would OPEC+ be receptive? Or would the Biden administration use higher gas prices to push its Green Agenda?

5. Oil Company Stock Prices

Q1 2021 is looking good for oil company stocks, though most of the profits are due to fluctuating circumstances. The companies took advantage of higher oil prices so far in 2021—which they must always do when prices rise—and they made money by trading oil and gas on the market. These successes are in contrast to what many oil companies are now touting as their futures.

Some companies, like BP (NYSE:BP) and Shell (NYSE:RDSa), have made significant public commitments to invest in green and renewable enterprises, but their strong showings this quarter are not due to these strategies.

BP, the first to release its Q1 earnings, beat analyst expectations with $2.6 billion in earnings, and CEO Bernard Looney talked up the company’s green portfolio during the earnings call. However, BP’s profits were largely due to higher oil prices and a good performance from its oil-trading arm. Royal Dutch Shell, which releases its numbers today, has also touted its green commitments. However, it has seen strong profits from its oil trading division.

Chevron (NYSE:CVX) and ExxonMobil (NYSE:XOM) will release their Q1 earnings on Friday. Exxon, unlike BP and Shell, made significant cuts to its oil trading division in 2020. Until very recently, Exxon also resisted the focus on green and renewable strategies that BP and Shell have promoted heavily. It will be interesting to see if the decision to cut back on oil trading made a difference for Exxon in Q1.

5 Market Catalysts Driving Oil Prices Higher

Related Articles

Andey Goilov
Crude Oil is Rising Cautiously By Andey Goilov - Apr 18, 2022

Early in the new week of April, oil is growing. Brent is currently trading at $112 but the bulls aren’t very active so far. A new wave of the USD strengthening is having a...

5 Market Catalysts Driving Oil Prices Higher

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Barbra Nakiwala
Barbra Nakiwala Apr 30, 2021 18:51
Saved. See Saved Items.
This comment has already been saved in your Saved Items
How do make teach me
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Our Apps
© 2007-2022 Fusion Media Limited. All Rights Reserved.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
  • Sign up for FREE and get:
  • Real-Time Alerts
  • Advanced Portfolio Features
  • Personalized Charts
  • Fully-Synced App
Continue with Google
Sign up with Email