An oil well in North Dakota. Photo: ConocoPhillips
Crude oil prices are moving higher amid concerns that low prices have led to too many crude production cuts.
The lower prices this year will eventually lead to lower production in the U.S. A Friday report showed the number of rigs in service for drilling in the country fell for the third straight week last week.
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According to the Wall Street Journal, government figures show U.S. oil production has fallen from 9.6 million barrels per day in April to 9.1 million last month and is expected to hit 8.6 million by mid-next year. This is raising concerns about oil, and consequently fuel prices, later this year and well into 2016.
Crude prices in New York as well as overseas were up more than 3% and nearly 2%, respectively, around mid-day on Monday. However, the New York price follows a Friday drop of more than 4.7%, indicating the crude market remains extremely volatile.
But there is another estimate that has some worried.
The OPEC oil cartel is forecasting U.S. crude production could drop next year by a whopping 27%. That, along with oil production cutbacks overseas, could push the price of oil back up $80 by 2020, taking diesel and gasoline prices along with it.
While trying to figure out when oil and fuel prices will return to higher levels is impossible, it may be safe to say that those who have been enjoying the big price declines the past year, may find such days are numbered.
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The one wild card remains the U.S. Federal Reserve, after deciding not to hike interest rates last week, there is now speculation if they will move before the year is out. No matter if its in 2015 or next year, some analyst warn that such a move could slow down the econonmy and that could lead to less demand for fuel and oil. That could throw expectation of higher prices both straight out the window.
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