Oil prices have returned to an even keel after going into three straight days of drops mid-last week. That’s even as normality starts to return to the US, and gasoline consumption returns to near pre-pandemic levels.

The West Texas Intermediate price dove from US$66.27 per barrel to US$62.05 per barrel on Thursday before staging a recovery.

The North American benchmark is currently priced at US$64 per barrel while its broader counterpart Brent crude is at US$66.89 per barrel after experiencing a similar fall.

At least part of the fall in oil prices can be attributed directly to the International Energy Agency’s shot across the bow, saying in its Net-Zero report that there should be no new oil, gas and coal projects in order to reach net zero emissions.

OPEC warned that the report not only contrasted with previous IEA reports but could also cause instability in oil markets if followed by some investors.

Oil prices had previously increased on bullish sentiment.

Consumption returning to normal, will oil prices follow?

Over in the US, traffic volumes have almost returned to normal with the Federal Highway Administration noting that traffic on all roads in March was down by just 4 per cent from two years ago, contrasting strongly with a drop of 41 per cent in April last year at the height of the first wave of COVID-19 infections.

Reuters reported that car use likely increased further in April and May as social-distancing restrictions were relaxed and more service businesses and offices re-opened.

Further highlighting this, the volume of gasoline supplied to the domestic market was down just 4 per cent at 8.9 million barrels per day (MMbbl/d) in the four weeks to May 14 compared with the pandemic five-year average of 9.3MMbbl/d.

This has also led to a resumption in gasoline production with refinery output down just 3 per cent compared with the average over five years from 2015 to 2019.

Sour crude facing a bleak future

However, while the resumption in gasoline consumption in the US is likely to be a positive for oil prices, not all oil producers will be happy going forward.

Venezuela in particular could be hit hard after China introduced new tax laws that make it prohibitively expensive to import sour crude – crude oil with relatively high levels of sulphur.

Oilprice.com reported that the new regulations could impact as much as 400,000 barrels per day of Venezuelan oil.

While Venezuela has not exported oil directly to China since 2019 due to US sanctions, its crude has still entered the world’s most populous country through Malaysian refineries, where it is mixed with fuel oil or bitumen.

China’s Ministry of Finance said it was taxing this ‘diluted bitumen’ as it was being used to make sub-quality fuels that were threatening fair market play and causing pollution.