After falling to the lowest level of $26 per barrel in February, oil prices have almost doubled to close to $50. Several factors are contributing to stop the price decline, such as supply disruptions in Nigeria, political instability in Venezuela and a weaker dollar. Additionally, oil and gas production in the United States is decreasing, because of low prices.
Oil production in the United States peaked at 9.7 million barrels per day in April 2015 and it is projected to decline by one million barrels per day by the end of this year. The reduction in production is better illustrated by the number of active rigs drilling for oil. According to data provided by Baker Hughes Inc. quoted in the Oil &Gas Journal, as of May 13, the number of active oil rigs in the United States reached 406. In all, 1514 oil drilling rigs have been closed since early December 2014.
However, there may be light at the end of the tunnel. Prominent oil analyst and historian Daniel Yergin, in a Wall Street Journal op-ed, anticipates that “by autumn declining production and rising demand should put the market roughly in balance,” with prices remaining at around $50 per barrel.
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