Oil rally closes in on nearly $70 per barrel
Oil closed in on $70 a barrel Friday as growing demand, falling inventories and restrained production lifted crude prices.
Oil gained 5 percent this week, settling at $69.62 a barrel in New York on Friday, the highest close since October 2018. A year ago, as the COVID-19 pandemic restrictions limited travel, commuting and social activity, oil was trading at about $37 a barrel.
Oil has rallied in recent months as vaccinations brought the pandemic under control in the United States and other countries, and social distancing measures were lifted. The Memorial Day weekend spurred a surge in travel, with the the auto club AAA estimating that number of Americans on the road jumped by more the 50 percent from last year.
The Energy Department reported Thursday that gasoline demand climbed more than 26 percent from a year ago and gasoline inventories, while rising over the week, were 3 percent below average for this time of the year. Crude stockpiles fell by 5.1 million barrels, also bringing inventories to 3 percent below average.
Meanwhile, OPEC and its allies this week agreed to maintain their policy of gradual increasing output. In the United States, production is flat, according to the Energy Department, holding at about 11 million barrels a day.
Energy companies, rather than ramping up drilling to chase higher prices, appear to be respond to investors seeking higher profits and less growth. U.S. output remains well below its peak in early 2020 of about 13 million barrels a day.
In a sign of that restraint, the number of drilling rigs operating nationally fell this week — despite the whiff of $70-a-barrel oil. Drill
ers idled one offshore rig, lowering the nation’s count to 456, according to oil-field services company Baker Hughes and research firm Enverus, which provide the weekly tally. A year ago, there were 284 rigs operating nationally as the global pandemic crushed crude demand and sent prices tumbling.
The rig count, a leading indicator of the nation’s oil and gas production, has been climbing for a half year after bottoming out at 244 in August. The rollout of coronavirus vaccines has lifted local economies and boosted travel, buoying demand for crude and petroleum products such as gasoline and jet fuel.
To meet recovering crude demand, drillers have added more than 100 rigs this year, with more than half the gains in Texas.
Texas lost two rigs this week, lowering the state’s count to 216. Texas is home to most of the Permian Basin, the nation’s most productive shale play, and hosts about half of the country’s oil and gas rigs.
The Permian Basin, which stretches from West Texas into New Mexico, lost one rig, lowering the count to 232 rigs. The Haynesville Shale in East Texas gained one rig, bumping up to 48 rigs, while the Eagle Ford in South Texas held steady with 33 rigs.