Oil prices fell to a five-year low Monday, but investors are expecting a rebound soon.
The Brent crude international index dropped $2 per barrel to hit $66.77. That’s the lowest level since October 2009.
Recommended Stories
The price declines reflect predictions of global oversupply. The Organization of Petroleum Exporting Countries has much to do with that, as the 12-member oil cartel at the insistence of top-producing Saudi Arabia decided not to cut production to buoy prices late last month.
The move has translated into lower gasoline prices for consuming nations, such as the United States. A recent survey said U.S. pump prices have dropped to their lowest level in four years. That’s acted as a mini-stimulus for the global economy, with Citigroup saying it could provide a $1.1 trillion jolt to the global economy.
Hedge funds see a bottom coming, as they bumped up their speculative bets on West Texas Intermediate — a U.S. benchmark for crude — by 14 percent.
Most U.S. shale energy companies will survive on low oil prices. The industry has found ways to cut costs for hydraulic fracturing, or fracking, in those tight-rock regions, where producing is more expensive than coaxing hydrocarbons out of conventional wells common in countries like Saudi Arabia.
Still, some oil producers have taken a bit of a hit in recent weeks, and drilling wells in “frontier” regions with higher costs are likely unprofitable. That has pushed more drilling operations into well-developed fields in North Dakota and Texas.
