There’s no question about it; the Houston economy and depressed energy sector have been tough on everyone. The crude oil prices in January 2016 marked the lowest prices in recent history, and it had a major ripple effect across Houston businesses in many industries. Fortunately, prices have almost doubled since those January lows, and we may be on track for higher prices as we head into the summer. Because Jonathan’s is located in the middle of the energy corridor we make sure to keep a close eye on the rise and fall of oil prices.
Oil prices have been on the rise this year
Due a mix of production dropping and demand rising, we have seen a surprising rebound in oil prices by over 70% in the last few months. Overall, many experts have had a cautious approach to oil price predictions, with some skeptical experts predicting that prices will hold steady in the mid $40’s for the next year. While there are many global factors that have an effect on oil prices, production and demand have had a significant impact in 2016.
Production has fallen
Across the globe, the recent low oil prices have forced production to be cut in a cost-saving effort. Some analysts believe that prices of $60 a barrel may actually be enough to kick-start production, especially across the United States. Due to outages in Nigeria, Iraq, and the UAE, as well as a dip in supply from Saudi Arabia, production has fallen 32.47 million barrels a day last quarter. Production drops are combining with a shrinking supply to drive prices higher. The World oil supply has fallen for the first time since early 2015 to 96.35 million barrels a day. In addition, the current wildfire situation in Canada has had an effect on the price of oil over the past week.
Stock Prices are higher
One encouraging trend we’ve seen lately is the rise in share prices across the largest oil production companies over the last three months. Chevron (CVX), Exxon (XOM), and ConocoPhillips (COP) are all up fairly significantly, which may show raised confidence among the investing community. We have found that most experts at least have tempered expectations for the energy sector, which is a far cry from the doom and gloom of the latter part of 2015.
Demand is Rising
So are we out of the woods yet? Not quite, but hopefully we are getting closer to a rebound in Houston. Many of us have friends and family members that have lost their jobs as companies cut back earlier this year, so the higher oil prices can’t come soon enough in our opinion! As the continued demand for oil rises in developed countries and potentially cuts into the current global crude “glut”, it’s possible that we could see prices as high as $60/barrel this year and $100/barrel by 2017. Fingers crossed is an understatement at this point.
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