Oil Price Volatility: What Causes It?

Oil has been in the industry for longer than can be remembered and has had its own history of ups and downs. Currently, oil is in its deepest decline since the 1990s; however it could have happened earlier.
The depression has resulted in a decline for companies who were able to make record profits in the past. This lead these companies to retire an estimated two-thirds of their rigs, thus making a deep cut in their investment for exploration and production.
The cause is the evident drop in oil barrel prices, which even came to a point that the price drop exceeded 70 percent.

What Ignited the Drop in Prices?

A question that is often asked, and a complicated one too, but the answer most often or not points to the famous economic rule of supply and demand.
Throughout the years the United States alone has increased its own oil production, leading oil imports to seek out other countries. Countries such as Algeria, Nigeria, and Saudi, who once sold their oils to the U.S. now shift to compete in the Asian Markets. Unfortunately these producers the shift comes with a forced drop in oil prices. Meanwhile, the production and export of both Canadian and Iraqi oil have been booming after every succeeding year.

Yet signs regarding a fall in production loom over the oil markets and this drop are due to a decline in the investments for exploration. RBC Capital Markets stated that there were projects that had the potential to produce an astonishing half-million barrels of oil a day were canceled, delayed, or retired by countries under OPEC in 2015 alone, 2017 could yield the same results.

It is expected that it may a couple more years or so before oil can return to being sold at $90 or $100 per barrel, something that was its normal price during its golden age.