Crude oil prices continued to advance on Wednesday, leading the commodity to reach its highest level since the fourth quarter of 2014. Oil closed above $61 per barrel, with markets generally bullish and projections for potentially higher prices to come.
The surge in oil prices has been generally attributed to a concurrence of two factors. The first, a generally positive economic outlook worldwide, has contributed to increased demand for oil globally. The second factor, the current political protests in Iran, has sparked concerns over the future viability of oil production in the OPEC member state. Those protests were said to be formally over on Thursday, according to the head of Iran’s Revolutionary Guard. However, it is unclear whether or not that statement accurately reflects the state of continued tensions over government policy in Iran.
The second case, however, may be more perceptive than objective. At present, analysts do not expect that Iran’s ability to maintain current output targets will be substantially affected by the protests. Without that reduction on the supply side, some experts believe that the current bullishness in oil may be unjustified. Adding to this argument is the fact that American producers appear poised to increase their production, adding to the already considerable global oil surplus. If production rates among American drillers continue to increase at their current rate, they could soon reach or even surpass the historical highs set during the 1970s.
Nevertheless, traders have put considerable stock in the idea of oil prices continuing to rise, with bets on increased prices significantly outweighing those on lower prices. Some projections have estimated prices as high as $70 per barrel for Brent crude. At the same time, the price increase of oil has also produced gains for oil company stocks. During trading on Wednesday, oil majors beat the already strong market.