This week, the price of U.S oil has fell nearly $40 per barrel – this is the lowest point in six years and almost a 65% decline from last summer’s highs. The Wall Street Journal reports that Citigroup’s analysts think there is “a 91% likelihood” that the price will drop closer to $30 a barrel and that this will happen very soon.
The continued price drop is influenced by several factors, including the end of the summer season, a period when the demand for oil is mainly at a high point. Beside this, there is the fact that oil-producing countries continue to stockpile their supplies and also the market concerns over the sluggish Chinese economy.
U.S. continues to drive record production while Middle Eastern countries, led by the Organization of the Petroleum Exporting Countries (OPEC) have shown no suggestions of cutting their production targets in order to bring global supply more in line with demand.
This year, in U.S. the production increased by about 600,000 barrels a day and has been holding stable at about 9.4 million barrels for numerous months. While the U.S. industry has kept drilling, the sock of falling prices shakes out the producers that find it problematic to fund operations.