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Since the end of February, prices of crude oil started to recover slightly, and for the first time in about two years rose just to the point where these had been in late Summer of 2015. This is still far below the average oil price of 2014.

Are oil prices going to rise further?

Crude oil price growth throughout March was a result of factors which don’t have much to do with supply and demand, and have more to do with stock and investor affairs. First, the initial price growth was a result of the US labor market report which indicated a strong increase in number of jobs during the first two months of 2016. However, the fact that there are much more people employed doesn’t necessarily mean they drive to work. Number of people who leave their office job for home-based work over the Internet is even greater. And it clearly means less cars on the street and less fuel consumption.

However, the price of oil kept rising through the end of March as a reaction to Fed decision of postponing interest rate hikes. This resulted in lower investments in dollar and dollar bonds, which turned the oil-to-dollar counter-proportional price mechanism. As dollar started to weaken to other major currencies, oil prices kept on rising to about $40 per barrel. Even these prices didn’t last too long. The refugee crisis in Europe and high odds that Britons will vote for Brexit on the upcoming referendum killed the value of the euro and the British pound respectively. Once the dollar started to gain its value towards these currencies anew, the oil-to-dollar mechanism reversed.

Rig count cut doesn’t help oil enough

As the last resort solution to defend this oil price growth trend, oil companies started to cut the number of active oil rigs. The number of rigs fell by 15 between March 20 and 25 but only slowed down the falling trend. The WTI still remains below $40. However, there’s one more hope for short-term recovery of oil prices. The upcoming meeting of oil exporting countries, which besides OPEC includes Russia and Venezuela will be held on April 17 in Qatar. This is by far the largest oil exporters official meetup in recent history. OPEC and non-OPEC oil exporting countries are under heavy pressure because of longterm low oil price trend, and are expected to lower their output in an attempt to push the prices targeting its supply and demand.

Why Even That May Not Work for Oil Price Recovery

Although the major reasons for cheap oil lie in recent supply booms and political issues which help oil extraction worldwide, such as lifting sanctions against Iran, oil exporters are still neglecting the demand side. The environmentally aware generations are coming, it’s the youth who likes to work from home over the Internet or go to work by bicycle. These new generations are also more ready to ride public transport instead of driving to work. Cheap oil of 2015 didn’t seem to drag them aboard their cars. And new car technologies utilize much less fuel than before, or no fossil fuel at all. Currently, the only sectore which increasingly uses oil is the civil aviation. Cheap oil made air tickets very affordable and people fly more often. However, airline consumption never had a major stake in total demand for oil, and more flights won’t do much for oil prices.

Oil prices are expected to stay low until at least the end of 2016.