After spurting to a new three-year high last week, the price of oil has just tumbled. The US benchmark dropped about 10%, to $66.50 per barrel from its recent high of $73. Brent crude fell about 6% to near $76 as well. What’s going on in the global oil market to trigger this decline, which is welcomed the world over by energy consumers? A recent article by Alanna Petroff, appearing in CNN Money, highlights the causes.
The Role of Saudi Arabia and Russia
The major trigger for the drop was instigated by none other than Saudi Arabia, the world’s largest oil exporter and kingpin of the OPEC oil cartel. The Saudi oil minister, Khalid Al-Falih, indicated that his country was in ongoing talks with Russia and other oil exporting countries to pump more crude into the market, easing what he referred to as “global supply concerns”.
The Venezuelan Connection
Another player in on the global oil stage is Venezuela. Their once-powerful oil industry is declining as part of the overall collapse in their economy. The decrease of Venezuelan supply is at least partly responsible for the recent three-year rise in oil price, as global supply from that exporter has diminished.
The Effect in the US Oil Patch
The domestic oil industry in the United States has emerged in recent years a powerful swing force in the global petroleum economy. US crude production has been rising over the last three years along with the global rise in price, as US producers looked to leverage higher oil prices. The current US rig count, that is the number of active rigs drilling for petroleum in the US and a major indicator of the health of the US oil industry, hit its highest level of the year last week. It remains to be seen if the most recent oil-price decline will diminish the domestic rig count