The price of West Texas Intermediate crude oil plunged this week to it's lowest prices in six years.
On Tuesday China made the move to devalue its currency, sending shockwaves around the globe and contributing to U.S. crude oil falling to around $42.
The federal Energy Information Administration (EIA) announced in its monthly Short-Term Energy Outlook that it had lowered its 2016 forecast price for U.S. benchmark oil (Brent) by $8 to $54 per barrel in 2016 and its 2015 forecast by $6 to $49 per barrel. The agency said it expects Brent to average about $59 per barrel in 2016 and about $54 per barrel in 2015.
The EIA says that “The recent price declines reflect concerns about lower economic growth in emerging markets, expectations of higher oil exports from Iran, and continuing actual and expected growth in global inventories.”
Second quarter results are showing the strain as producers tighten their belts, reduce rig counts for the third quarter in a row. If prices remain this low, the financial squeeze will get tougher for companies as we move into the fall months.
The EIA announced that U.S. oil production had peaked in April as it hit 9.7 million barrels per day the highest level since 1971.
WTI is now down more than 30% in just the last few months after a 50% rebound earlier this spring.