Brent crude, considered by most analysts to be the global benchmark for oil prices, fell below $50 a barrel for the first time since January amid slowing demand growth and growing global oversupply.
Crude oil prices have fallen to six-month lows again after rebounding over 50 percent from $43 per barrel at the beginning of 2015.
Brent crude, considered by most analysts to be the global benchmark for oil prices, fell below $50 a barrel Monday for the first time since January amid slowing demand growth and growing global oversupply. Brent fell 4.6 percent to $49.81 at the lowest point for the day, while U.S. crude was down 2.4 percent to $45.97.
A survey from Reuters last week indicated oil production by the Organisation of Petroleum Exporting Countries (OPEC) reached its highest levels in “recent history” in July, despite predictions earlier this year that falling prices would slow production. Saudi Arabia and “other key OPEC members,” in particular, remain steadfast in maintaining output levels in order to protect its market share regardless of oversupply concerns.
Likewise, Iranian oil minister Bijan Zanganeh said Iran will likely increase its production significantly once economic sanctions from the United States and European Union are lifted, according to Reuters.
In addition to oversupply concerns, analysts attributed the fall in prices to recent reports of slowing U.S. economic growth and the stock market collapse in China, the world’s biggest consumer of energy products.
“The main oil demand growth engine of the world [is China, and it] may not be leading the global oil rebalancing effort anytime soon,” Dominick Chirichella, analyst at the Energy Management Institute, said in an industry note. “Supply is likely to remain robust for the foreseeable future, prolonging the long awaited rebalancing of the global oil market.”
In theory, lower crude prices mean people pay less at the pump and economists say U.S. consumers are likely to use that extra money to buy other goods and services, which helps to grow the economy. For the U.S. energy market, however, this is more bad news as U.S. oil producers have been increasing the number of drilling rigs despite falling prices and worldwide oversupply, according to a recent Wall Street Journal report.
In terms of the transportation industry, lower fuel prices mean lower operating costs for carriers, which should translate to lower rates for shippers, though this has not always proven to be the case.
Crude oil prices take another tumble
