This Is What Will Determine If Oil Prices Go Up Or Down
It appears as if oil prices could be on the verge of a rebound, with new data showing that the U.S. oil patch is hitting an inflection point. While specific shale regions – such as North Dakota’s Bakken and Texas’ Eagle Ford – have posted production declines, overall U.S. oil output managed to edge up in recent months.
But now that U.S. production has finally dipped, it may augur a new phase for oil markets in which production cutbacks could lead to higher prices. The Energy Information Administration reported on April 1 that total U.S. oil production fell for the week ending on March 27, falling 36,000 barrels per day to 9.38 million barrels per day.
The prior week’s production level of 9.42 million barrels per day was the highest level in three decades. If output continues to decline, mid-March 2015 could mark the peak of U.S. oil output, at least for the foreseeable future.
Related: Three Triggers That Will Send Oil Crashing Again
That would raise the possibility that oil prices have bottomed out. Where do they go from here? Is it possible that oil prices could dip any lower? If they are indeed about to rise, will they rise quickly or stay flat for a while before gradually ascending?
There are several major determinants of oil prices one should consider.
1. U.S. Production. The first and most important thing to watch is the aforementioned levels of U.S. production. Weekly figures come out from the EIA and we should get a better sense of where U.S. oil flows are going next week. Consistent weekly drops will put upward pressure on prices.
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