10$ a Barrel – Fiction or Reality?
Although Crude oil seemed to rally lately to the 50$ area, the causes for this price steep are temporary and may not last. According to the International Energy Agency, even if the U.S will cut the barrels by 600,000 a day and an additional 200,000 barrels a day in 2017, there would still be excess supply of 1.5 million barrels a day! Add that figure to the current excess supply 1.5 million barrels a day and you get an overwhelming number. Furthermore, the vertical drilling ring number continue to lessen in the U.S and are being replaced by horizontal rings that can drill up to 30 wells per platform which increases the output per drilling ring.
Another issue that affects demand is global economic growth which is fairly low. Environmental energy conservation factors are refrained from using oil and the technological advancement enables an increase in producing from 58.1 million barrels in 2015 to 58.6 million in 2016.
All this combined causes a major over supply which exceeds the demand greatly, this over supply causes barrels to accumulate and as a result many barrels are being thrown away. All these things combined causes prices to decrease.
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