Oil’s Remarkable Price Run Is Just Beginning

Oil’s Remarkable Price Run Is Just Beginning

FILE - In this file photo, the sun sets behind an idle pump jack near Karnes City, Texas. (AP ... [+] Photo/Eric Gay, File) Some traders fear the market is running ahead of itself since financial players have had a significant influence in the rally by buying up oil futures contracts. But physical prices and the time spreads on the exchanges back up the strength of this market. The forward curves for Brent and the U. S. benchmark West Texas Intermediate (WTI) are firmly in steep backwardation for the foreseeable future. That means prices for prompt oil deliveries trade at a premium to oil for later delivery and indicates a tight crude market. The oil market is done rebalancing supply and demand from the pandemic. Supply cuts from the OPEC-plus alliance are responsible for balancing the market. Capital investment cuts by U. S. producers have helped, too. During recent fourth-quarter earnings calls, shale producers almost uniformly said they would not chase growth this year despite WTI's recent spike to over $60 a barrel - the first time it has breached that level since early 2020. The shale sector's commitment to capital discipline and delivering financial returns lifts a huge weight