US oil benchmark tops $80 per barrel for first time in 7 years

The price of US West Texas Intermediate (WTI) crude oil exceeded $80 per barrel for the first time since November 2014 this week following reports that Washington will not tap the nation’s oil reserves to curb gasoline prices.

Global oil prices accelerated growth on Friday evening, with the value of November futures on WTI growing by 1.99% to $79.89 per barrel after briefly breaching the $80 benchmark – on course for a seventh straight weekly gain amid tightening supply. The price of December futures for global benchmark Brent crude also increased by 1.56% to $83.21 per barrel.

Experts attribute the growth to this week’s indications that oil supplies will remain strained. According to Bloomberg, the US Energy Department (DOE) on Thursday waved previous reports of planning to release crude oil from the government’s strategic reserves to the market to curb rising gasoline prices. The department reportedly said that it had no plans “at this time” to tap the reserves. However, a later report by Reuters citing a source in the DOE claimed Bloomberg’s report “is not accurate.”

The DOE on Thursday said all “tools are always on the table” to tackle the low energy supply and to bring down the cost of crude oil in the market, which may still include using oil reserves or pursuing a ban on oil exports. Analysts see the first option as more likely, as Washington has a history of tapping into strategic reserves, usually after hurricanes or other major supply disruptions. As for cutting exports, experts say this is an unlikely step, as the US has become a significant oil exporter in recent years, and has not reduced oil deliveries since ending a 40-year ban on crude sales in 2015.

Other factors have contributed to the global rise in oil prices, analysts claim. For instance, the decision by the Organization of Petroleum Exporting Countries (OPEC) and its allies to stick to plans to add only 400,000 barrels per day of supply in November, although Washington repeatedly urged the group to increase output that was cut during last year’s pandemic-induced crisis.

The week’s rise in oil prices has also been influenced by soaring gas prices, which brought about a move towards switching to oil as an alternative, boosting the demand. Market analysts warn that the rise in gas prices and the extent of fuel switching from gas to oil will be the key factor in the forming of oil prices, especially in the face of the coming winter.

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