The price of crude oil leveled out Tuesday to around $32 per barrel after falling to 12-year lows of nearly $30 this week. The price of oil has continued to plunge throughout the beginning of the year, and news of the price plateau comes one day after several U.S. investment firms warned that national oil companies could be at risk for bankruptcy, the Wall Street Journal reported Monday.
U.S. Oil and gas companies combined have been losing an estimated $2 billion a week. And investment companies, including Morgan Stanley and Goldman Sachs, issued warnings that the price per barrel will likely continue to drop and may even reach closer to $20 per barrel. An analysis published by Morgan Stanley described the current crisis as “worse than 1986,” according to the same report in the Journal, referring to the 1986 crash when the price of oil per barrel fell below $10.
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Overproduction, caused in part by the U.S. shale boom as well as exceptionally high production in Middle Eastern countries, has contributed to the continuing low prices. Low demand, particularly from developing nations such as China, coupled with a strong dollar, has caused the price per barrel to plunge since mid-2014.
Producers in the Middle East have refused to cap production in order to stabilize the price per barrel. Many of the largest oil production companies in the region have called for OPEC to enforce a temporary cap. OPEC has refused, saying the market will steady out on its own.
Investors with commodities-heavy portfolios have looked to profit from the global gas crisis, buying cheap shares in energy companies with the rationale that they will bounce back in two years. "Every time you hit new lows there's the potential for profit taking, and as people try to pick the bottom of the market," Richard Mallinson, a geopolitical analyst at Energy Aspects, told Reuters.