U.S.-based oil futures settled above $90 a barrel on Thursday for the first time since October 2014.
The price surge signals optimism on the part of traders that the worst of Covid-19 will soon be over. Oil supplies are now nearly back to pre-Covid levels, and demand has risen nearly all the way back too—with the exception of jet fuel.
Several analysts have predicted that oil prices will eclipse $100 a barrel in the months ahead, because supply isn’t growing fast enough to keep up with the expected surge in demand.
West Texas Intermediate oil futures settled Thursday up 2.3%, to $90.27 a barrel. The futures have gained for five consecutive sessions and are up 20% this year.
Oil stocks appeared to be trading more with the sluggish market than the soaring commodity. Shares of Exxon Mobil (XOM) were down 0.5% on the day.
While high oil prices can mean the economy is doing well, they also can hurt consumers, adding to inflation in other goods.
“The last time oil prices were above $100 the term staycation became popular as consumers stopped traveling via car and plane opting for summer vacations in their hometowns,” wrote Rob Thummel, senior portfolio manager at TortoiseEcofin, in a note on Thursday. That said, “consumers are likely willing to pay higher prices for gasoline and plane tickets for a period of time as they have the income and the desire to be more mobile outweighs the additional cost due to higher oil prices.”
Write to Avi Salzman at [email protected]
