Dropping Oil Prices Might Push Producers Out of the Market

Published Date : Sep 23, 2015

Oil and gas exploration in New Zealand is expected to witness a sharp decline due to prediction about drop in oil prices. In the coming summer season New Zealand has reported no offshore drilling projects.  The oil industry reported that the shrinking drilling activity has been a result of the end of several projects. The industry further accepted that many oil companies are cutting down on costs. As China’s economy is witnessing a slowdown the oil prices across the globe are plummeting. This is mainly a result of dropping energy imports.

Though China’s demand is faltering, there has been a significant rise in the United States’ production. This increase has largely been due to improving technology and the reserves that are available for production. Presently, the biggest economy in the world is producing its own oil to cater to its domestic demands.
Oil was priced above US$100 a barrel in June 2014 and is currently down to US$50 a barrel. Analysts at Goldman Sachs have predicted that this could drop a shocking price of US$20 a barrel in the coming future.

Economists at Westpac stated that this alarming drop of prices might spell bad news for a few producers, actually pushing them out of the market. This would only mean that the price might rise up to US$60 a barrel by 2017 but not more than that. Westpac further added that this drop is purely structural.