The free-fall of crude oil prices continues as the rate fell below $28 per barrel, its lowest price of the last 7 years, while some analysts now expect that the ‘black gold’ could remain under $30 per barrel at the end of 2016 in case the Chinese yuan will be devalued even lower. But which are the parameters that contributed to the crude oil’s nosedive to such low levels, and which could be the ones to initiate a recovery?

Simply speaking, the reasons for the price decrease is excessive supply that led to little demand. The Chinese economy’s slowdown in growth reduced its overall appetite for commodities. And to make things worse, Saudi Arabia in its efforts to maintain its large market share as crude oil producer, refuses to reduce production that would contribute to a price boost. At the same time, the increasing production of shale oil by the U.S. implies that it grows as an increasingly self-sufficient nation, and therefore doesn’t contribute to the demand for oil.

It is now increasingly hard for oil companies to continue with oil production at the North Sea when the product fell at such low prices. Leading oil companies including Shell, BP, and Total seized several of their projects and so several hundreds of jobs have been lost. And even though most of them manage to pay dividends to their shareholders, they could find it hard to continue doing so if things continue in the same manner.

There are a few experts who believe that the U.S. can still tolerate the current crude oil price levels due to its local shale oil production, but even with that being true, it is getting harder to find storage places given the oversupply. And that in turn also pushes crude oil prices to drop, because producers are forced to sell the oil as there are no places to store it.

What could decide the future of crude oil prices is the current political situation in the Middle East. Since the imposing of sanctions on Iran, Saudi Arabia acquired a larger market share. Now with the lift of those sanctions, Saudi Arabia is reluctant to surrender that share back, and unless other Middle-Eastern nations agree to cut production also, there is no intention by the world’s second largest oil producer to do so. The current political tension between Iran and Saudi Arabia could also be a proof that the latter wants to prevent Iran from regaining some market share.

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