Oil Prices Take an Unexpected Slide
Oil prices have dropped more than 20% since late April due to growing fears of weaker-than-expected demand, the New York Times reported. The prospect of higher tariffs on Chinese and Mexican goods also has investors nervous about a further softening of demand.
This past Wednesday, the Times reported, crude oil futures in the U.S. closed at $51.68 a barrel, down 3.4%, even as the stock market closed higher. Also on Wednesday, government figures showed rising supplies of oil, at a time of year when they’re usually tight as summer driving season gets underway.
It was in contrast to six weeks earlier. At that time, tightening sanctions on Iran and Venezuela, along with the outbreak of civil war in Libya, led some analysts to worry about supply and speculate that oil could reach $90 or more per barrel.
“Everybody is surprised and now doubting projections of global demand growth,” Tom Kloza, global head of energy analysis at the Oil Price Information Service, told the Times. “It’s not as though there has been a reapproachment with Iran. It’s not as though there has been an increase in the rig count in the United States or Canada.”
The American oil benchmark has swung up and down over the last year, the Times reported. The current price is at about the same level as it was at this point in 2016, when prices began recovering from levels that dropped below $30 a barrel in 2014 and 2015.
The average price for regular gasoline nationwide this past Wednesday was $2.80 a gallon, a decline of nine cents from a month earlier. Motorists paid an average of $2.94 per gallon a year ago.
Kloza predicted that the price could drop below $2.50 in the coming weeks. This would help consumers, he said, especially lower-income households that have older, less efficient cars.
At the same time, lower oil and gasoline prices would hurt petroleum-producing states such as Texas, Oklahoma and Louisiana. Nonetheless, the Times noted, most oil companies can still make money at current prices.
Oil companies have enjoyed better prices for much of this year than they expected, and are generally well positioned because they are spending less, Raoul LeBlanc, executive director for energy at IHS Markit, told the Times. Yet, he added that the petroleum industry could struggle if prices fall much below $50 a barrel.
“Fifty-buck oil is not a great place—it’s survival,” LeBlanc said. “But if it goes below $45, it’s unsustainable, and the companies will not be able to spend the money to even maintain production.”
For comments, questions or concerns, please contact Paul Bubny
- ◦Economy
Connect CRE News
Your source for daily news covering CRE transactions and trends. Stay informed on national, regional and property sector news that matters to your business.
Connect Events
Whether digital or in-person, Connect Events set the stage to bring together relevant content with CRE’s most active players to engage, influence and inform.
Connect CREative
A full-service marketing agency dedicated to CRE clients. Combining our CRE background with our team’s business, marketing, communications, technology, to develop and execute comprehensive strategies to create, build, and and grow successful brands.