However, OPEC P.R. efforts and U.S. intervention in Venezuela may alter the price course: File Image/Pixabay
While it may be just as problematic as the notion of global oversupply that dominated analytical fears until recently, the perception of a tightening market continued to result in gains for crude prices, with U.S. oil settling a substantial 2.4 percent higher on Wednesday.
Brent was up 98 cents, or 1.47 percent, to $67.63 per barrel, while West Texas Intermediate climbed $1.50, or 2.64 percent, to $58.37 per barrel.
Several factors contributed to the idea of a tightening market, including the Energy Information Administration reporting on Wednesday that U.S. crude inventories fell by 3.9 million barrels last week.
Mohammed Barkindo, secretary-general, OPEC
We have been operating in silos for too long
Another influence for traders was U.S. sanctions against oil exports from Iran and Venezuela said to be contributing to the tightening: Barclays noted that "Failures in [Venezuela's] electrical system ... [are] likely to accelerate the loss of 700,000 barrels per day" in oil supply,
But the Venezuelan situation may change, especially considering U.S. president Donald Trump's desire for gasoline prices to stay at low levels for the benefit of American motorists: Secretary of State Mike Pompeo told media on Wednesday that "every option is on the table to deliver to the Venezuelan people the democracy they deserve; and then ultimately we'll build back an economy where they can again have the wealth that they have under their own feet."
In assessing what lies ahead, at least one analyst reminded observers that other factors apart from sentiment primarily influence crude price movements.
Brian Stutland, chief investment officer at Equity Armor Investments, said, "We're seeing some supplies tighten a little bit...and also the correlation between oil and the stock market and demand coming back into the picture has sort of driven it: oil lagged a little bit as the dollar strengthened, and I think it's trying to play catch-up.
"So it seems like $60 is in the card here...and with the driving season coming on, I would expect oil to trade above $60 by the time we hit the Memorial Day driving weekend."
Meanwhile, presumably in a bid to diffuse the hostility Washington has for the Organization of the Petroleum Exporting Countries (OPEC) - which is widely viewed by the Americans as contributing to the higher oil prices via its current production cuts - Mohammed Barkindo, the cartel's secretary general, told media on Wednesday that "We have been operating in silos for too long, and this is not good practice in today's globalized world."
Barkindo added that OPEC continues to reach out to energy stakeholders because "with more dialogue there will come more understanding" and less "miscommunication."