Oil prices fell from $ 115 a barrel in June 2014 to about $ 40 today. It continued to decline despite reports of a decline in the number of US exploration platforms, which have increased significantly in recent years.
The oil industry has experienced a decline and a rise in the past, but the decline in the last 18 months was the most violent since the nineties of the last century.
Oil lost one-third of its value in 2015. US corporate profits fell, forcing it to shed about a third of the exploration platforms and cutting investment in exploration and production at a time when some 200,000 industrial workers lost their jobs.
Main reasons for the fall in oil prices:
*** US Production Rise:
US production has almost doubled in the last six years. While Saudi Arabia, Nigeria and Algeria were competing for US markets. Competition shifted to Asian markets and producers had to cut oil prices as production of Canada, Iraq and Russia increased.
There is no indication that US production decline is currently enough to raise prices in 2016.
The economies of Europe and developing countries are weak, and cars are becoming more energy efficient. Thus, demand growth is decreasing due to the so-called digital economy that has introduced technological changes to the structure.
In these circumstances, OPEC refuses to cut output or intervene to rebalance the market, which suffers from inflation.
The OPEC basket price has fallen by about 50 percent since it rejected a cut in production at a meeting in Vienna in late 2014.
Saudi Arabia has historically played the role of a “flexible product” that can increase or decrease production, but it and other countries are now adhering to their market share.
High dollar exchange rate
The rise in the dollar is also a cause of weak demand for oil. As the barrel of oil is denominated in dollars, making it higher price for other currency users.
Experts believe that producers may see the end of the matter that it is inevitable to reduce production if prices fell to about thirty dollars a barrel.