Why oil prices may begin falling again?

After reaching a $50 per barrel level, the price of oil has calmed down recently. West Texas Intermediate has not cost more than $40 a barrel since April after dropping almost as low as $26.00 a barrel in February.

04.Jul.16 2:34 AM
By Anastasia Sutulova
Photo Toinnov.com

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The collapse in oil prices is mostly explained by the over-supply, on the one hand, and stagnant demand, on the other hand. As a result of this imbalance, not only the prices, but also the total number of oil rigs in the US dropped to record lows in May. But this was more positive than negative, as supply disruptions around the world seemed to calm down the glut.

However, the over-supply problem has not been solved yet, which can make oil prices begin falling again.

Over the past three weeks, the oil rig count around the world has gone up, showing that there will be no drops in international supply. Moreover, OPEC countries did not manage to somehow limit the output. As a result, only a sudden pick-up in demand can save oil prices, which does not seem very probable, either.

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