Oil on Wild Ride; How Will It End?
NEW YORK (AP) — The price of oil is on a wild ride, and there is little agreement on where it's headed.
After falling nearly 60 percent from a peak last June, the price of oil bounced back more than 20 percent as January turned to February. Then, on Tuesday, it sunk 5 percent, closing just above $50. Oil has fallen or risen by 3 percent or more on 14 of 27 trading days so far this year. By comparison, the stock market hasn't had a move that big in more than three years.
Predicting prices is especially tricky now because the oil market has never quite looked like this. Oil price collapses of the past were triggered either by plummeting demand or an increase in supplies. This latest one had both. Production in the U.S. and elsewhere has been rising, while slower economic growth in China and weak economies in Europe and Japan means demand for oil isn't growing as much as expected.
As recent trading shows, any sign of reduced production inspires traders to buy oil, and every new sign of rising supplies sends prices lower. In a report Tuesday the U.S. Energy Department, citing unusual uncertainty, said the price of oil could end up anywhere from $32 to $108 by December.
"There are many more laps to come on this roller coaster," said Judith Dwarkin, chief economist at ITG Investment Research.
As oil bounces up and down, so will the price of gasoline, diesel and other fuels. Almost no one expects a return to the very high prices of the last four years, so drivers and shippers will continue to pay lower prices. It's a question of how much less, and for how long.
Oil Will Rise
Those expecting a quick and lasting price jump see mounting evidence that drillers in the U.S. are pulling back fast because they're no longer making money. A closely-watched survey by the oil services company Baker Hughes shows that the number of rigs actively drilling for oil fell to 1,140 last week, down 29 percent from a record high of 1,609 in October.
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- Baker Hughes: Oil Drillers In Canada Boost Rigs To 10-Month High (Jan 12)
- Baker Hughes: US Oil Rig Count Ends 2017 40% Above Year-Ago Levels (Dec 29)
- Baker Hughes: US Drillers Add The Most Oil Rigs In A Week Since June (Nov 10)