A month ago, it seemed inevitable: A massive global oversupply of crude oil production would overwhelm storage tanks in Oklahoma and fill supertankers off Singapore. But now, Reuters reports there are growing signs that the U.S. oil market can avoid the doomsday scenario in which it runs out of room to stockpile surplus crude, a development that oil traders worried would send crude prices into another tailspin.
One reason is that refiners, spurred by high profit margins, are rushing to buy crude and churn out more fuel in response to an unexpectedly swift rise in U.S. road travel and soaring Chinese demand for fuel-hungry sport utility vehicles.
Furthermore, shale oil drillers have hit the brakes on new wells faster than many anticipated. This could throw years of unyielding growth into reverse as early as May.
Oil prices are starting to reflect these changes. U.S. crude has rebounded from a six-year low of $42 a barrel, although those gains were built partly on growing anxiety over tumult in Yemen last week and a drop in the U.S. dollar.
“On a global basis I think sentiment has definitely shifted,” says Amrita Sen from Energy Aspects. “The main reason it’s shifted is that people are realizing demand isn’t actually that bad; in fact, it’s phenomenally strong.”
