Oil Prices Continue to Plummet With Surprise Rise in Stockpile

Thursday, January 14, 2016

It’s no secret that recently gas prices have taken a tumble. Now no one is complaining about having to pay less at the pump, but if you are wondering why prices are as low as they are, it’s because we’re experiencing a surplus that is causing quite a stir in the oil community.

Just last week, U.S. crude oil inventories rose by 2.6 million barrels, putting the total reserve at 487.4 million barrels, a level not seen at this time of year in more than 80 years. This caused the price of a barrel of oil to slide as low as $36.50 in the final week of 2015, according to CNN reporting, which erased market gains from earlier in the week as well as further depressed other energy stocks.

This isn’t just a recent trend, however, as oil prices collapsed nearly 30 in 2015, putting prices back around levels last seen during the global financial crisis. Worse, the surplus levels don’t appear likely to drop soon. Slowing demand from countries such as China will more than likely cause the surplus to remain for some time, and Middle Eastern producers in OPEC continue to pump oil out at record levels.

The drop in price has really put a strain on U.S. oil producers as well. Production costs are high and with prices so low, many aren’t getting what they need to keep everything running smoothly. The depressed oil market has resulted in 100,000 job cuts throughout the energy and mining industries, and the likely continuation of record levels could mean that even further workforce reductions could be on the way.

Lowrance Machine Shop specializes in creating, designing and fabricating machined parts and components for a wide variety of businesses – including companies in the oil industry. If you would like more information on the services we offer, give us a call today at 281-449-6525.