Oil prices have averaged near $40 per barrel the past three months, and prices are likely to improve after a vaccine is distributed, but experts at the Federal Reserve Bank of Dallas estimate it won’t be until early 2022 until the oil glut is worked off.
Brent crude, the international benchmark, averaged $41 in the first half of November, according to the Dallas Fed’s energy indicator report. Oil priced in Midland —closer to the wells of the Permian Basin—averaged $39 a barrel. In Houston, a hub for exports and refined, West Texas oil averaged $40 per barrel.
Two main factors are holding down oil prices, Dallas Fed President Robert S. Kaplan said at virtual conference hosted by the Federal Reserve Bank of Dallas and Federal Reserve Bank of Kansas City. Global markets are still working through the supplies that flooded the market in the spring when Saudi Arabia and Russia launched a price war just as demand began to crater.
In addition, people are still driving less and far fewer are flying, pummeling demand for gasoline and jet fuel. Driving activity is down 88 percent from a year ago, Kaplan said, while the Houston Airport System estimated that number of Thanksgiving travelers though Bush Intercontinental and Hobby Airports is down by half this year.
GETTING SMALLER: Expect more consolidation in the oil and gas industry
Kaplan said that activity and energy demand will climb next year as COVID-19 vaccines are distributed. “We’ll work off excess inventory and that will have a positive effect on oil prices,” he said.
The promise of a vaccine has lifted oil prices over the past week. Oil on Wednesday settled above $45 a barrel for the first time since March.
The U.S. oil and gas rig count has recovered with oil prices. The number of operating drilling rigs fell 69 percent from the high point in early January to the low of 244 in early August. The rig count this week reached 310, up 10 from the previous week, the Houston oil field services company Baker Hughes reported.
Demand for fossil fuels will remain significant over time, Kaplan said, but fossil fuels will account for a smaller percentage of total energy consumption as wind, solar and battery technologies advance.
“There will be a healthy oil and gas industry for years to come,” Kaplan said, “But it will be more consolidated.”
becca.carballo@chron.com
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Oil prices hover at $40 a barrel, optimism it will improve with vaccine - Houston Chronicle
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