Crude oil prices rose above $74 a barrel in during the week ended 10 June, moving up on falling inventories in the US and concerns about future supply in light of a deepwater drilling accident in the Gulf of Mexico.
The US’ benchmark July West Texas Intermediate (WTI) contract rose to $74.48 a barrel on 10 June, down $0.14 a barrel from a week before, but above $72 a barrel for the first time in six days.
In Europe, the July Brent contract was trading at $74.09 a barrel, up $0.97 a barrel from 3 June, also trading at less than $72 a barrel for the intervening week.
Analysts at Barclays Capital, the investment arm of the UK bank, point to two factors as driving the recent increase in prices, which fell from above $80 a barrel to below $68 a barrel in May.
The first is a fall in crude oil inventories in the US. Stocks fell 1.8 million barrels to 361.4 million barrels during the week ended 4 June after weeks of gains in the world’s biggest energy market, while gasoline stocks remained static, according to the US’ Energy Information Administration (EIA).
The second comes from the impact of the Deepwater Horizon crisis in the Gulf of Mexico. An explosion and fire on the deepwater drilling rig on 20 April caused the main platform to sink, while crude oil started leaking from the well, which was being drilled at a depth of approximately 1,500 metres below sea level.
The US’ Interior Department subsequently imposed a six-month moratorium on drilling at depths greater than 150 metres; a halt to exploration drilling currently under way in the Gulf of Mexico; and the cancellation of planned exploration and production licences in both Virginia and the Gulf of Mexico.
The department has also postponed offshore drilling planned in for Alaska in 2011, and other licenses which were due to be offered in 2011 and 2012.
As a result, the EIA has cut forecast production in the US by 2.4 million barrels for 2010 and 25 million barrels in 2011.
Although the Barclays analysts do not believe this will have a major impact on prices in the short term, it could affect production and values in the medium-to-long term, they say.