The price of West Texas Intermediate (WTI) crude fell below US$27 a barrel yesterday amid a global glut in oil supplies that seems to be getting worse. Oil prices had already fallen to 12-year lows this week, and the price of WTI, the benchmark for T&T's light sweet crudes, dropped US$1.91, or 6.7 per cent, to US$26.55 a barrel in New York–its biggest one-day plunge since September 1. Brent crude fell 88 cents, or 3.1 per cent, to US$27.88.
James Liu, global market strategist for JPMorgan Funds, said the global economy remains relatively healthy and demand for oil hasn't fallen off. But production remains too high, so tremendous stockpiles have accumulated. While companies started shutting down drilling rigs in late 2014 after prices started to decline, production of oil didn't change much.
"We're starting to see production declines basically two years after rig count started to decline," Liu said. He said production will keep falling and oil prices will stabilise in the middle of 2016, then start rising.