Crude Oil Temporary Goes Below the $40-dollar Mark Due to Over-Supply

For the first time since April the price of crude oil fell below $40 a barrel on Tuesday. This can be attributed persistent oversupplying.

In early morning trading, the contract for the New York futures for September delivery fell to $39.90 before having a resurgence to get up to $40.80 US at 10:15 a.m. ET.

The fall in prices that morning represent a 20% fall slump from its most recent peak in June which was above $50 a barrel.

Figures from a recent inventory of the U.S. Energy Information Administration indicated that the US added 1.7 million barrels of crude oil in the third week of July which represent an unprecedented level of inventory figure for this early in the year.

The E.I.A. added that the oil stock in the inventory rose by 61 million barrels from the previous year’s total taking it to 521.1 million. Comparing it to the stock of two years ago makes for stellar reading as it rose by 150 million barrels.

Pump prices in Canada down 16% in past year

Although the oil industry is groaning about the slump in prices, consumers are benefitting as it means cheaper oil and gas.

Results from a weekly survey of pump prices by The Kent Group shows that the average price for a liter as of July 26 of unleaded gasoline across Canada was $1.024. That represent a 16% reduction from last year’s price.

However, according to some this slump is only temporary. Merrill Lynch of Bank of America predicts oil prices to go above $50 a barrels by the end of the year in an interview with Bloomberg Television.

Bloomberg carried out further surveys by interviewing analysts and asking them where they think oil prices will be at by 2017. The average estimate they got was $57 per barrel.