The oil producing countries of the world are continuing to crank out the crude despite a glut on the market. This continues to be good new for consumers at the gas pumps and for home heating oil prices this coming winter.
On Monday, world oil prices continued to plummet in a free fall that has seen prices crash to a new 7 year low. The world’s oil producers, however, say that they will continue with their current production levels despite the fact that there is a huge glut of their product sitting on docks and in warehouses.
The Organization of Petroleum Exporting Countries (OPEC) reported on Friday that its membership was not going to reduce its production levels at this time. Currently, OPEC is pumping out 30 million barrels of crude oil every day, according to The Wall Street Journal. The announcement by OPEC caused a huge sell off on Monday of oil stocks and natural gas also fell to it lowest prices not seen in many months.
While consumers have seen lower gasoline prices at the pump and may be seeing some significant savings in home heating oil this winter, utility companies have continued with mass layoffs and some countries like Venezuela and Russia are seeing revenues decrease sharply to the point where it is depressing their economies.
The oil glut will continue throughout all of 2016 analysts say as inventories will not have a chance to decline if production continues at its current levels. The oil producers continue to oversupply the market in an effort to simply try and maintain their current market share.
Light sweet crude traded at $37.60 which was a decline of 5.9 percent. The benchmark for global oil is Brent and that fell to $40.70, a loss of 5.4 percent. OPEC has decided to stay with their current strategy which they have held tightly in place for all of 2015. They would rather maintain or boost market share than cut back on production and cause an upswing in prices.
If current trade restrictions on Iran are taken away next year, OPEC predicts that even more oil will be produced over the course of 2016 than what has been produced this year. Oil prices will continue to drop as there is nothing else for them to do under this current market strategy.