The improving economic scene – both here in the U.S. as well as worldwide – and the continued unrest in producing countries had been the main driver of the oil rally, which saw the commodity zoom past the $110 per barrel level earlier this year.
However, apprehensions about high U.S. crude stocks, the release of emergency oil supplies from government-held strategic reserves into the world market, and uncertainty over oil supply disruptions in the Middle East have been weighing on investor sentiment, weakening oil prices to less than $100 a barrel.
But far too many factors weigh on oil prices to definitively size up each one of them for their respective impact on prices. Some of those factors include OPEC decisions, geostrategic tensions the value of the U.S. dollar and seasonal variables, etc.
As per the latest release by the Energy Information Administration (EIA), crude supplies are higher than the year-earlier level and are above the upper limit of the average for this time of the year. This has led to domestic demand concerns against a backdrop of persistently slow job growth. At the same time, global oil consumption is expected to grow at a healthy rate this year, buoyed by the continued strength in the major emerging market economies.
As such, crude oil’s near-term fundamentals remain patchy to say the least. The long-term outlook for oil, however, remains favorable, given the commodity’s constrained supply picture.
A supply glut pressured natural gas futures for much of 2010, as production from dense rock formations (shale) remain robust, thereby overwhelming demand.
As per the U.S. Energy Department, domestic gas output increased significantly in 2010 by an estimated 2.4 billion cubic feet per day, or 4.1%, as production declines in Alaska and the Gulf of Mexico were offset by a healthy increase in lower-48 onshore volumes. Storage amounts hit a record high of 3.840 trillion cubic feet in November, while gas prices during the year fell 21%.