West Texas Intermediate (WTI) Oil Futures fell about 3% on Friday, brining the crude oil prices briefly below $40 on Friday, for the first since 2009. The continues fall in oil prices is the result of the global market’s failure to reach equilibrium between demand and supply.
United States has been a major player in disrupting this equilibrium, as oil production in the United States started booming in 2008 and hasn’t stopped or slowed down since then. Earlier this week the U.S Energy Information Administration reported the energy firms built two additional oil drilling rigs, which is the fifth increase in a row in the amount of oil rigs.
Of course the problem is not just with the United States starting to produce its own oil, the oil surplus is a global issue, where pretty much all of the players refuse to reduce production. Saudi Arabia, together with rest of OPEC members has produced the highest number of barrels a day in more than 3 years, 31.5 million barrels a day, and Saudi Arabia alone produced about a third of that of that amount.
Another looming concern of global oil producers is the upcoming decision on the agreement between the United States and Iran, which potentially will allow Iran to become a major player in the oil industry and trade globally. If the economic sanctions on Iran are lifted, oil prices are projected to continue sliding.
The International Energy Agency predicts that global supply of oil will remain in a surplus of about 1 million barrels a day all through next year.