Oil price surges to 7 Year high as OPEC continues output

Oil prices

There was a lot of information worth talking about on Monday regarding the markets. Investors were largely bearish as they reacted to new developments from Evergrande, as well as the continued debt ceiling talks taking place in Capitol Hill right now. Amidst all of this, energy stocks continued to skyrocket as oil prices posted a new record gain. Prices officially hit a seven-year high on Monday following one major announcement from OPEC.

Prices for Brent crude settled at around $81.3 per barrel, up more than 2.5% over the past 24 hours. The main catalyst for this jump came from OPEC, with the cartel confirming that it plans to stick to its current rate of production increase of 400,000 barrels per day until April 2022. Normally, oil prices fall as supply goes up. However, considering many analysts were expecting OPEC to further increase output given how high prices are, the news that the plan remains unchanged has helped prop up already surging oil prices.

Here in the U.S., domestic oil drilling and output have been steadily rising as well, although still far from pre-pandemic levels. The last time domestic oil prices were as high as they are now was several years ago when there were 1,100 more oil rigs drilling for oil, compared to the 428 current online at the moment.

This ongoing rally in oil prices is part of a larger bull market run in the commodities sector. Industrial commodities in particular, like lumber, have shot up exponentially over the past year thanks to economic reopenings all over the world. This trend has equally affected energy commodities, resulting in the steady increase of prices to now over $80 per barrel. That’s in stark contrast to last year, where oil prices hit negative territory amidst an OPEC/Russia price war.

Given the demand picture and the outcome of the OPEC meeting, the overall sentiment around crude is bullish,” said John Kilduff, partner at Again Capital. Rising oil prices have also been fuelled by steadily increasing natural gas prices, which have shot up more than 300% over the past year.

Part of this has to do with Hurricane Ida, which more or less halted all oil and gas production in the American Southeast. Even as this output now comes back online, gas prices are expected to continue to go up as the winter season comes around, which is when demand is at the highest. Overall, 2021 is set to be a record-breaking year for the energy commodities market.

As you would expect, most oil stocks were in the green on Monday. Companies like Devon Energy (NYSE: DVN), Halliburton (NYSE: HAL), and Eversource Energy (NYSE: ES) were all up a few percentage points by the end of the day. Some of Monday’s best-performing stocks were energy companies, like New Concept Energy (NYSE: GBR) and Mexco Energy (NYSE: MXC), which were up 16.4% and 46.4%, respectively.

The only potential fear that some energy traders have is that another lockdown could take place. However, given the FDA’s approval of Pfizer’s vaccine as well as other new treatments, the likelihood of us having a repeat of a 2020-style global pandemic lockdown remains unlikely, at best.