5 Reasons Oil Prices Could Plunge

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5 Reasons Oil Prices Could Plunge

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Oil Prices Are Down 50% Already The price of oil has fallen by around 50% since summer 2014. Predictions of where oil will be at the end of 2015 ranges from $20 to $100 per barrel. There are a few major reasons to think the price of oil will fall.

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U.S. Production Continues to Increase Despite cutting back on drilling new wells, U.S. production is expected to increase in 2015 The EIA expects U.S. oil production to grow from 8.7 million barrels per day (bbl/d) in 2014 to 9.3 bbl/d in 2015 and 9.5 bbl/d in 2016

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OPEC Is Keeping Production Steady OPEC has shown no signs of breaking from its 30 million barrel per day production target, which won’t ease supply pressure in the oil market.

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No One Is Joining Calls to Cut Production OPEC would cut oil production but it won’t do so alone. Russia has little incentive to cut production given its tumbling currency. U.S. oil producers will only cut based on market forces, not national mandates. This leaves a standstill of oil production, leaving the market oversupplied.

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Demand Isn’t Growing In The Developed World Recently, U.S. oil consumption has risen as the economy improved and people bought more SUVs, but the long-term trend still shows declining demand in developed nations, a problem if supply is increasing.

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Storage Is Filling Up Eventually, oversupply means storage facilities will fill up. If they do, prices could plunge rapidly.

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2015 Might Be Rough For Oil There’s no guarantee oil prices will go lower, but market forces are pointing to lower prices. Unless OPEC or Russia cut production or U.S. suppliers reduce output faster than expected prices could plunge.

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