Prices of oil increased to their highest point in more than three years a week ago, which shocked many at the rate in which they climbed. A week later and prices are freefalling.
US crude futures have fallen by as much as 10% to about $66.50 a barrel, which is down from last week’s $73. Brent crude, considered the global benchmark has fallen by 6% and is trading at $76 after it peaked a week ago at over $80.
The sharp decline in prices was triggered by Friday’s comments by Saudi Arabia, the largest oil exporter in the world and considered the OPEC oil cartel leader, energy minister Khalid Al-Falih during a panel discussion in Russia that he was in talks with Russia as well as other nations in OPEC about pumping more oil to ease concerns over global supply.
Members of OPEC and Russia are scheduled to meet June 22 in Vienna to discuss the easing of their self-imposed caps on production, which they put into place in January of 2017.
Al-Falih said that OPEC as well as Russia could supply more oil to markets around the world in the short term and make up for the output collapse in Venezuela, and the impact of sanctions by the U.S. against Iran.
The pressure pushing downward on oil continued throughout Monday as traders looked over data that show an increase in the number of oil rigs in the U.S., which indicates possible growth in production in the US.
Crude production in the U.S. has increased by 25% since the middle of 2016 as producers attempt to capitalize on the increase in prices.
Baker Hughes the company that specializes in oilfield services released info on Friday that showed the North America rig count had hit its highest point of the year during last week. The current rig count globally is now above the average that was set in 2017.
The fall in prices of oil for drivers has been welcome news as it has been for companies that purchase large amounts of energy. For instance, airlines usually have much higher profits when the price of fuel is lower and countries such as India benefit when the price of crude is low.
Oil markets touched a sweet spot in early 2018 when prices were from $60 to $70 a barrel. Experts consider that level of pricing to be sufficient enough to sustain the supply and low enough to keep the demand in place.