The reasons for price drop of crude oil Essay Example | Topics and Well Written Essays - 750 words

The reasons for price drop of crude oil - Essay Example Crude futures declined in the recent past on concerns global oversupply is hurriedly  filling oil stocks. Total petroleum output in the year 2015 is expected to go up to 9.35 million barrels every day, slightly more than the 9.3 million barrels daily forecast in the previous period, the Energy Information Administration (EIA) said last week in its monthly short-term energy outlook. Independently, oil stocks went up more than anticipated marking the several consecutive week of a higher overall than at any other time for the last 80 years and more. The American commercial crude oil stocks rose by appoxialely4.5 million barrels from the previous week, the EIA said Wednesday. Another reason weighing on oil price is the OPEC. The U.S. oil output could be adversely affected in the years due to low oil prices offered by the OPEC countries. In addition, the lower global oil prices may have affected the marginal barrel output from other sources, such as shale, OPEC said.  The OPEC body controls a significant percentage of the world’s fuel production. As such, any decision they make directly affect the market prices of the commodity. In this case, the petroleum trading block may take actions targeting their competitors. Such actions may include flooding the market with the commodity leading to market forces coming into play and hence price decline. America has been in the frontline in the war against terrorism. As such, the country has formulated various policies aimed at reducing terrorism. Such policies have been affected towards Iran and Tehran for their alleged involvement in nuclear weapon manufacturing. In this case, the two countries are prohibited from placing their products in major global markets. However, USA and the two countries have signed several deals that have seen the reintroduction of petroleum product from two nations. In this case, the total global supplies increase prompting the market forces to push the prices