It's hard to read the headlines of the past several years and not come to the conclusion that the world, or at the very least the United States, is awash in oil. In fact, the Energy Information Administration announced last week that oil inventories in the United States are approaching an all-time high. Meanwhile, last year, thanks to shale drilling, U.S. crude production rose to the highest level in a quarter century. The United States is set to overtake Saudi Arabia as the world's largest producer of energy.
By most fundamental measures, oil prices should be declining. So why is Brent Crude at nearly $110 a barrel, close to multi-year highs?
As I write in my new weekly commentary, there are a couple reasons that, despite the surge in domestic production, oil prices have reverted back to the upper-end of a multi-year trading range: