Since the start of October 2009, the daily closing spot price for West Texas Intermediate (WTI) crude oil has fallen between $70 and $85 dollars per barrel 92 percent of the time. When the WTI spot price did not close within this range since the beginning of October 2009, closing prices above $85 per barrel were a bit more common than those below $70 per barrel. During the past two weeks the closing WTI spot price pushed past $85 on November 4 and closed above $87 per barrel on November 8 through November 10. As seen in Figure 1, oil prices have not been this high since October 2008, at which time they were falling rapidly from historic highs seen earlier that year. With recent spot prices now near or above the $85 level for the longest consecutive stretch since early October 2008, market participants are naturally interested in whether or not the $70 to $85 per barrel price range will remain relevant over the coming months.

Source: Thomson Reuters

Comparisons between recent movements in the spot prices for WTI and other crude oil streams provide some insight into whether the recent WTI increase is a local phenomenon or reflects global pressures. As illustrated in Figure 2, other closely-watched crude oils have largely kept pace with WTI. The spot price for Brent, the benchmark crude oil for Europe, increased from around $77 per barrel on September 22 to about $88 per barrel on November 10, an increase of $11 per barrel, similar in scope to the $15 increase seen in WTI. The spot price for Dubai crude oil, a benchmark for Asia, increased from about $75 per barrel to over $85 per barrel over the same time period. Meanwhile, the spot price for Malaysia Tapis (another Asian benchmark crude oil) increased from around $81 per barrel to $95 per barrel, nearly the same increase seen in WTI.

Source: Thomson Reuters

Strong growth in recent global oil consumption, and the expectation that it may continue, is one factor that has contributed to recent crude oil price increases. In the current Short-Term Energy Outlook, projected growth in world real Gross Domestic Product (weighted by oil consumption) is 3.9 percent in 2010. Economic growth this year, particularly in China, is one of the reasons EIA now expects global petroleum consumption to grow 2.0 million barrels per day (the second highest annual growth rate in at least the last decade). While world oil supplies have risen significantly this year, stronger than expected demand growth has generated downward pressure on inventories, especially in regions outside the United States. As an added symptom of a tighter market, numerous reports indicate that floating oil storage is significantly lower than year-ago levels, diminishing a secondary source of supply to the market that was available on short notice.

Ultimately, the future direction of oil prices will depend on how robust the factors driving recent price increases turn out to be.

Source: U.S. Energy Information Administration