Oil prices in the U.S. have fallen to a new six-year low as of August 11th, reports the Wall Street Journal. This drop is likely due to a surge in gasoline stockpiling during the summer season. Over the past decade, global provided oil reserves have increased by 27%, or over 350 billion barrels. As summer is reaching an end, the demand for fuel starts to decrease, which is likely to result in a product surplus.
Crude oil fell 2.5%, or $1.07, below the low for this year’s average oil price. At $42.23 a barrel, oil prices dropped below the previous record set in March 3, 2009. Despite the falling prices, many U.S. oil companies refuse to cut back on their oil production.
Since early June, oil prices have fallen by more than 31%. Many analysts are speculating that the fall in prices is not going to end any time soon, and believe that the price could soon go below $40 a barrel.
“We are trading at levels not seen since the depths of the great recession,” says Stephen Schork, president of The Schork Group. “The overall trend in this market is very bearish.”
Other macroeconomic factors may have contributed to the recent drop of oil price. The strengthening of the U.S. dollar makes it more profitable for non-U.S. investors to sell crude oil. In addition, the demand for U.S. oil in China has been slowly decreasing, which has lead to an increase of local supply.
While many U.S. refineries have begun to slow production as the summer season draws to an end, other companies continue to add to stockpiles. Because of this, crude oil prices will continue to fall as demand goes down and supply goes up.