Oil Industry Remains Cautiously Optimistic

Since before the 1990s, the oil industry has experienced major ups and downs, showing more of the latter at the end of 2015. On a global scale, revenue has been down for companies, with around 250K oil workers laid off due to the sharp decline in the U.S alone. This loss of jobs has a direct correlation to the plummeting price of a barrel of oil, which has diminished more than 70 percent since the summer of 2014.

Though some rebound occurred at the end of December of 2015, January and February of 2016 showed a return to falling prices.  The cost of oil per barrel is seeing the lowest levels it has seen in over 10 years when the industry was amidst what was termed an oil glut (the unsold crude that is piling up around the world).

Crude Oil Price Decline

Crude Oil Price Decline

With these figures in mind, oil executives are predicting years before the cost of oil recovers to anywhere near $90+ a barrel, which was the norm the last decade.

The reason for the decline is complex. One factor has been the changing landscape of energy-efficiency in the auto industry. In other words, vehicles and people in the EU and US are becoming more environmentally aware, calling for less crude. In the United States, gas prices now average a little more than $2 a gallon down almost 50 cents within a 12-month period.

But a bit of optimism may be in order for the oil industry. According to a New York Times article this month, there have been slight signs that supply and demand for oil could recover from its recent volatility by the end of 2016:

“Oil markets have bounced back more than 40 percent since hitting of low $26.21 a barrel in New York in early February. At the time, many analysts, including forecasters at Goldman Sachs, said that oil could slide to $20 a barrel with little to stem the decline.”

The oil industry enters April with caution. If the market remains oversaturated with oil production, with no signs of demand picking up, troubles will return.  The hope is that over the long term, demand for fuels continues to show the rebound exhibited in March, which could help crude prices recover in the next year or two.

 

2017-06-19T14:52:47+00:00 April 1st, 2016|Blog, Finance, Global Markets|2 Comments

2 Comments

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