On December 26th NYMEX low traded at $1.6205 per gallon. Since then, the price has moved higher to $0.27 per gallon moving ever closer to the $2.00 mark.
After a sharp rally to begin the year, oil prices have been trading in a tight range over the past two weeks and are waiting for their next cue to determine price direction.
Brent crude Oil prices hit a two-month high near $64 a barrel as OPEC led supply cuts and U.S. sanctions against Venezuela's oil exports brightened the supply outlook, but prices fell back on uncertainty about prospects for the global economy.
This week the U.S. was not only faced with a polar vortex but the price of oil is on track for short-term gains with a possible spike in prices we saw last November. There are a few contributing factors to the recent boost that are highlighted below.
Winter is upon us and if you haven’t noticed yet, you certainly will today. Wind chill in the northern plains of the country, near Minneapolis and North Dakota, is reportedly being recorded at around -61°. This Polar Vortex is being categorized as dangerous and life threatening and will also carry heavy snow with cities like Chicago experiencing high temperatures of -12°. That would be 4° colder than Mount Everest which is forecasted at a high of -8°.
So what is the polar vortex exactly? Essentially, there are two polar vortices in the Arctic which are described as a jet stream. This jet stream is present all year round, with the polar vortex appearing during the winter months. What causes the vortex is the temperature differences between the mid latitudes in Northern America, where the United States is and the cold air from high latitudes, the Arctic. These temperature differences cause the jet stream to flow from high-pressure environment in the mid latitudes to the lower pressure areas of the Arctic. The spinning of the Earth on its axis and wind patterns pushing the circling vortex cause parts of the vortex to break off and invade areas like the United States while warmer air is circulated towards the Arctic. Some see this as continuing evidence that global warming does in fact exist as the polar vortex jet stream weakens resulting in uncontained colder temperatures drifting south while, once frigid arctic climates, are becoming noticeably warmer.