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After a much-needed bullish run to start the summer, it appears that the upward momentum of oil prices has completely reversed. Oil futures declined over 15% in July, and prices continued to fall even further to begin the new month today.
The price of the West Texas Intermediate (WTI) benchmark slumped $1.34, or 3.22%, to $40.26 per barrel on Monday morning, while Brent crude, the international benchmark, fell $1.29, or 2.96%, to $42.24 per barrel.
Oil’s price slip on Monday morning is mostly due to the latest data from OPEC. The 13-member organization saw supply increase to 33.41 million barrels per day in July. That figure was up from 33.31 million barrels per day in June. Most of the increase in supply can be attributed to higher shipments from Nigeria and Iraq.
Nigerian supply had previously taken a hit after several attacks from militant groups put a dent in the country’s output. July’s production indicates that the effects of the attacks are seemingly nullified and the nation’s capacity to produce oil has recovered.
It comes as no surprise that production from OPEC nations is once again driving prices lower. Oil has continued to struggle since OPEC decided to abandon its historic policy of limiting supply to maintain prices back in late 2014. In an effort to curb the competitiveness of new U.S.-based oil extraction techniques like fracking, OPEC countries have flooded the worldwide market.
This nearly two-year saga with oil prices is also starting to impact even the most giant oil companies. Industry leader ExxonMobil (XOM - Free Report) just released its second-quarter earnings results last week, and both earnings and revenue came in below our consensus estimates.
In fact, Exxon’s profit fell 59% to $1.7 billion in the quarter. While that may seem like a lot compared to smaller oil companies that are struggling to even turn profits right now, that $1.7 billion actually represents the lowest profit the company has turned since 1999.
While oil prices peaked at over $50 a barrel in June, the month of July showed us that the outside factors affecting worldwide supply were not that great, and prices shot down once again. As we know by now, oil most likely will not regain any substantial momentum until there is a concerted effort by OPEC nations to once again limit supply.
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Oil Prices Plummet on Continued Supply Glut
After a much-needed bullish run to start the summer, it appears that the upward momentum of oil prices has completely reversed. Oil futures declined over 15% in July, and prices continued to fall even further to begin the new month today.
The price of the West Texas Intermediate (WTI) benchmark slumped $1.34, or 3.22%, to $40.26 per barrel on Monday morning, while Brent crude, the international benchmark, fell $1.29, or 2.96%, to $42.24 per barrel.
Oil’s price slip on Monday morning is mostly due to the latest data from OPEC. The 13-member organization saw supply increase to 33.41 million barrels per day in July. That figure was up from 33.31 million barrels per day in June. Most of the increase in supply can be attributed to higher shipments from Nigeria and Iraq.
Nigerian supply had previously taken a hit after several attacks from militant groups put a dent in the country’s output. July’s production indicates that the effects of the attacks are seemingly nullified and the nation’s capacity to produce oil has recovered.
It comes as no surprise that production from OPEC nations is once again driving prices lower. Oil has continued to struggle since OPEC decided to abandon its historic policy of limiting supply to maintain prices back in late 2014. In an effort to curb the competitiveness of new U.S.-based oil extraction techniques like fracking, OPEC countries have flooded the worldwide market.
This nearly two-year saga with oil prices is also starting to impact even the most giant oil companies. Industry leader ExxonMobil (XOM - Free Report) just released its second-quarter earnings results last week, and both earnings and revenue came in below our consensus estimates.
In fact, Exxon’s profit fell 59% to $1.7 billion in the quarter. While that may seem like a lot compared to smaller oil companies that are struggling to even turn profits right now, that $1.7 billion actually represents the lowest profit the company has turned since 1999.
While oil prices peaked at over $50 a barrel in June, the month of July showed us that the outside factors affecting worldwide supply were not that great, and prices shot down once again. As we know by now, oil most likely will not regain any substantial momentum until there is a concerted effort by OPEC nations to once again limit supply.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>