Oil prices have recovered from their 2014 nadir, as evidenced by the fact that after years of painfully low prices for energy producers, oil prices at the Brent crude global oil benchmark are now well over $60, briefly reaching $67.84 a barrel recently for a three-year high. Of course this is a far cry from the days when market pressure had forced the price of oil to over $100 a barrel, but it marks a return to market balance, allowing sellers to rid themselves of the excess oil inventories which they had accumulated since the dark days of 2014.
Concerns that new electric vehicles (EVs) entering the market will steal market share away from oil are premature. In fact globally, crude oil inventories continue to decline while demand continues to grow. However, production problems in places like the North Sea and Venezuela, combined with the OPEC agreement with key non-OPEC producers like Russia that will keep output down by 1.2 million barrels per day, translates into a macro energy market that is unlikely to see a sudden flood of production to take advantage of 2017’s price recovery.