NYMEX crude financial contracts (WTI) settled at 99.6 USD/bbl on Tuesday this week, which is a high not attained in over a year.
A number of factors could be at play to drive this price higher.
One driver could be the political unrest in Egypt which came to a head just yesterday (on July 3rd) with the removal of President Morsi by the army.
While Egypt is not a major exporter of oil to the US, the Suez Canal and a number of important pipelines run through the country. Approximately 2 million barrels of oil are transported through the Suez Canal on a daily basis. Instability in this region can cause traders to worry about the stability of supply.
Another likely cause of the increased prices are decreasing stock levels in the US and positive demand indicators. The U.S. Energy Information Administration’s weekly petroleum status report for the week ending June 28th showed storage levels decreasing week-over-week by 10.3 million barrels. While supplies have decreased there are some positive indications that demand will grow. Estimates of the upcoming jobs report suggest that jobs growth has continued to be strong, which is a positive sign for the U.S. economy.
Further, the U.S. Commerce Department reported a better than expected rise in factory orders in May. These positive indicators combined with a shrinking supply of crude have likely contributed to the increasing price of crude.
With the crisis in Egypt likely to persist at least in the short-term and economic performance continuing to rebound, the US could see higher crude prices in the coming months.
If you’re interested in monitoring the on-going changes in crude prices, check out our crude market snapshots which monitor the changing gap between WTI and Brent forward curves.