Machinery Lubrication / Changing Workforce

The age of $40 oil may be here to stay

By Nathan Vardi, for Forbes

Aug 20, 2015

On Wednesday, the price of West Texas Intermediate, the benchmark for U.S. crude oil, fell 4.3% to $40.80 a barrel, hitting levels not seen since the depths of the financial crisis more than six years ago. Brent crude, the global benchmark, fell to $47 a barrel.

The world is soaked in oil and recent data from the U.S. Energy Information Administration showed that oil stockpiles had unexpectedly climbed some more, this time by 2.6 million barrels last week. Smart money managers like to say that the cure for lower oil prices is lower oil prices, but all indications this summer are that oil producers from Saudi Arabia to the U.S. continue to pump despite lower oil prices.

After rallying for much of the year, the great oil crash that started in the fall of 2014 has returned in the summer of 2015 with a vengeance. When the oil price crash started last year, the talk was about oil supply coming from unconventional U.S. shale oil and the decision by the traditional swing oil producer, Saudi Arabia, not to cut production and stabilize prices.

Oil traders focused on oil storage and U.S. rigs counts, and the price per barrel of oil increased in the first half of 2015 as oil stockpiles and operational rigs declined. However, in the summer of 2015, the oil story also includes issues related to demand, particularly connected to concerns about China, where the government seems to be taking aggressive measures like weakening its currency to rekindle a slowing economy.

Read the full story here.