Five facts: Why are oil prices falling?

Bharat Bhushan @Bharatitis

Since mid-2014, global crude oil prices have fallen precipitously. In June 2014, a barrel of Brent crude sold at $110. By early 2015, that plunged to $60. Today, it sells below $30 - a level not seen since 2004.

By all accounts, this is a staggering decline and no one knows what the rock bottom is going to be.

Today, with falling global demand for oil, the slowdown in the Chinese economy and the refusal of Saudi Arabia to cut oil output levels, the world has far more oil than anyone needs. Supply remains much higher than demand and therefore prices have crashed.

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If the Saudis do not cut production, then there is no way that those who have begun benefitting from oil export, like Iraq, or those who hope to benefit from it, like a post-sanctions Iran, would hold back production.

Iraq has doubled its production since 2014 and Iran is eager to benefit from oil exports now that economic sanctions against it have been lifted. This could push prices down further.

If the Saudis thought that oversupply resulting in low oil prices would bankrupt the frackers of America and help them maintain market share, that too has not happened to the extent expected. The United States continues to produce a significant amount of oil through "fracking" of shale.

How long will oil prices keep plummeting and what is the price decline all about? Watch on.

(Video edited by Shadab Moizee)

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Bharat  Bhushan

Bharat Bhushan @Bharatitis