Investors are scrambling as the volatile nature of oil prices has rang again. On Thursday, the price of a barrel of crude oil fell to lower than $40 which signals the biggest drop in the last two months. The rumored cause of the drop was massive reserves in oil and also combined with the impressive strength of the U.S. dollar.
The U.S. Governments’s EIA or Energy Information Administration group estimated that the current U.S. stockpile of crude oil reserves bumped up almost 10 million barrels last week. This huge surplus has counteracted plans last week by such large oil producers as Saudi Arabia and Russia to combat the lower prices by freezing production. That change had driven prices upwards over the last few weeks but with the newest report issued today on reserves, this trend has been changed to a lower crude oil pricing.
Crude futures dropped an impressive 3% this week which was the largest drop since the beginning of 2016.
Trading for the rest of the week is expected to be low and not affect current pricing as the weekend brings the Easter holidays.
Those involved in this market have believed the freeze in production from Saudi Arabia and Russia would not have a lasting effect on the crude oil market as the Saudis were technically the only country allowed to adjust the production of crude oil.
The United States has long been the largest consumer of crude oil as well as the country importing the most oil to its shores. But uniquely, the U.S. is also sitting on some of the largest oil and gas production with huge reserves.