Prices of oil began the year just where they left off in 2014. The slide in crude continued unabated with crude slipping below the $45 a barrel mark for a brief period. The nosedive sparked fears that a spurt in oil production will lead to instability in energy markets across the world.
Though the current levels are an improvement from the $45 mark, oil prices are far below than what they used to trade last year in June. As of latest data, WTI Crude Oil is at $50.34 a barrel, while Brent Crude Oil is trading at $60.22.
The plunge is primarily owing to the plentiful North American shale supplies in the face of lackluster demand expectations, sluggish growth in China and the prevailing softness in the European economy. Strengthening of the U.S. dollar also impacted the demand for the greenback-priced crude, as it is now expensive for importers to buy oil.
The decline in oil prices may continue this year. Though this may lead to losses for energy companies, other sectors may gain from this phenomenon. Given these factors, adding certain mutual funds from other sectors would be a prudent decision.
US Rig Count Crashes
Amidst the plunge in oil prices, Houston-based oilfield services company Baker Hughes (NYSE:BHI) reported another massive fall in the U.S. rig count (number of rigs searching for oil and gas in the country) - the 10th such decline in a row.
This can be primarily attributed to steep cutbacks in the tally of oil-directed rigs, which saw another huge crash. Talking numbers, oilrig count dropped to the lowest level since Aug 2011, as crude prices revolved around the $55 a barrel level on plentiful supplies and lackluster demand expectations.
