Oil Analyst Says ‘Fear’ Drove Prices Down From 7-Year High

Schork Group Director Stephen Schork on Wednesday explained the “fear” driving oil prices back from a 7-year high on “Cavuto: Coast to Coast”, noting that it is “still a pretty attractive buy” .

Schork stressed that there had been a “significant rise” in oil prices over the past month, “mainly due to fears of a tight supply”.

“OPEC was expected to keep the reins pretty tight until the end of the summer and that really prompted buying into the market,” Schork told Neil Cavuto, FOX Business host.

“Now we have the news that the United Arab Emirates [United Arab Emirates] stepped up, don’t want to respect, don’t want to play with what has been proposed by Saudi Arabia and Russia and now there is fear that we are going to have a price war where the UAE wants to monetize, because they said in their own words, the billions of dollars they have invested in their infrastructure over the past few years. ”

He went on to say that oil prices have “significantly” fallen from their highs over the past few days “lest we get a significant amount of supply” at the end of summer “as we have already exceeded peak demand “.

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On Sunday, the United Arab Emirates pushed back the OPEC Plus group, which includes non-OPEC producers like Russia. The UAE has said it supports a proposal for a gradual increase in production favored by Saudi Arabia, the group’s largest producer, and non-member Russia. However, the UAE has said it also wants an increase in its own allowed level of production.

With no new date set for the resumption of talks, oil markets are left in at least temporary uncertainty over future supply, as fuel demand continues to recover from the worst of the China pandemic. coronavirus and associated blockages.

As economies began to rebound from the pandemic and vaccine distribution accelerated, the OPEC Plus group increased its oil production so that daily reductions averaged around 6 million barrels per day.

Currently, the OPEC Plus alliance produces some 37 million barrels per day compared to about 43 million barrels per day in April of last year, at the start of the pandemic.

OPEC Plus has met monthly to decide to increase production, however, two days of talks last week failed to reach a deal. Discussions were due to resume on Monday, however, the session had been canceled.

Energy names led the declines for the entire market on Wednesday as West Texas Intermediate crude fell 1.9% to $ 71.99 a barrel.

According to an AAA press release, the national average price of gas has risen about 40% year-to-date, from $ 2.25 on Jan.1 to $ 3.13 on Tuesday.

AAA has warned that drivers can expect gasoline prices to rise another 10 to 20 cents through the end of August, bringing the national average to over $ 3.25 this summer.

AAA spokesperson Jeanette McGee attributed the rise in gas prices to “robust gasoline demand and more expensive crude oil prices.”

Schork said that “the Schork group’s probabilistic modeling gives a 70% chance that oil prices will be between $ 78 and $ 68 until the end of the month.”

“So that translates into about an extra 10 cents when you look at the historical correlation between crude oil prices and gasoline at the pump,” he continued. “So that could potentially take gasoline prices by the end of the summer to that $ 3.20, $ 3.30 range.”

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Schork acknowledged that the range is actually expensive, adding that “adjusted for inflation over the past two generations, it’s still a pretty attractive buy.”

The last time crude exceeded $ 76.40 was in November 2014 and the last time the national average was $ 3.25 was in October of the same year, according to AAA.

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Daniella Genovese, Jonathan Garber and the Associated Press of FOX Business contributed to this report.