Oil prices have started the New Year with a bang as the price of a barrel of crude oil currently sits just below $82 in early Wednesday (January 5th) trade on the New York Mercantile Exchange.

Benchmark crude oil for February delivery was at $81.53 in the morning, down 24 cents. This was after a close on oil prices of $81.77 Tuesday, a day in which oil contracts were up 26 cents to a 14 month high.

The recent surge through the $80 level for oil prices has been largely attributed to changes in supply and demand factors. Crude supplies were down by 2.3 million barrels last week according to a Tuesday report from the American Petroleum Institute.

This was much greater than the 1.6 million barrel drop that was anticipated by analysts surveyed by the information arm of McGraw-Will, Platts. This shows that once historically high levels of crude reserves in the US are dwindling, suggesting demand is improving.

While oil prices are surely going to help keep gas prices high as well, it is a good sign that perhaps consumers and businesses are finally showing renewed interest in travel and business expansion.

Consumer spending has shown modest improvement in the last few reports. Many analysts are watching for steady re-growth in jobs and business expansion as final signs that the economy is on solid ground again.

Many companies cut back on company travel and transport of goods as the economy got was sinking deeper into recession. While some more aggressive businesses are already started to build back up, others are waiting for reassurance that all is back to normal for the economy.

Higher oil demand is one factor that would push oil prices higher. The other would be a movie by OPEC to cut its output, something it has not opted to do at this point.

Neil Kokemuller

LiveCharts.co.uk

Neil Kokemuller is an Associate Professor of Marketing at Des Moines Area Community College in Des Moines, Iowa, USA. He has a MBA from Iowa State University. He is also in house stock market commentator at Live Charts UK, where you can find real time charts and share prices .

Please note: The information provided in this article is intended for informational and entertainment purposes, and not as advice for financial decisions or investments. Actions taken on the basis of the information shared is at the sole risk and discretion of the individual. Currency investment poses significant risk of loss.

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