Oil price is down again this morning after new stockpile figures show about 4.6 million new extra barrels’ worth of oil went into storage last month, compared to the 100,000 estimate most analysts were expecting.
All this extra oil is going into storage because the global supply, or how much oil producers are pumping out of the ground, is exceeding demand by a wide margin. Oil prices fall because buyers know that sellers are having a hard time unloading their products, so the buyers simply demand lower prices. The producers are hesitant to lower production because they are sure demand is going to pick up soon, but also because they’re waiting for some other producer to cut production first.
Each producer knows that if everyone else cuts supply first, they will get a higher price and more profits. But if they cut first, they will simply lose out on the little revenue they had, so very few are willing to make the gamble. Eyes are still on OPEC to start asking members to cut supply, but no action has been taken yet.