Oil prices

First of all, let's find out why did the price of oil keep falling during the last seven months.

Back in June 2014, the price of Brent crude was up around $115 per barrel. As of January 23, 2015, it had fallen by more than half, down to $49 per barrel:

The short version of the story goes like this: For much of the past decade, oil prices have been high — bouncing around $100 per barrel since 2010 — because of soaring oil consumption in countries like China and conflicts in key oil nations like Iraq. Oil production in conventional fields could not keep up with demand, so prices spiked. That led to large price spikes, and oil hovered around $100 per barrel between 2011 and 2014.

Yet as oil prices increased, energy companies found it profitable to begin extracting oil from difficult-to-drill places. In the United States, companies began using techniques like fracking and horizontal drilling to extract oil from shale formations in North Dakota and Texas. In Canada, companies were heating Alberta's gooey oil sands with steam to extract usable crude.

This led to a boom in "unconventional" oil production. The US alone has added 4 million extra barrels of crude oil per day to the global market since 2008. (Global crude production is about 75 million barrels per day, so this is significant.)

By late 2014, world oil supply rose much higher than actual demand. A lot of unused oil was simply being stockpiled away for later. It have caused oil prices to start dropping from their June peak of $115 per barrel and in September, prices started falling even more sharply.

Please read a full article at www.vox.com

Now, let us look at the current situation on the market.

03 Feb, 2015 (Reuters) - Oil opened firmly in Asian trading on Tuesday after clocking up gains of 11 percent in the prior two sessions, but prices began coming off their best on persistent worries over China's demand outlook.

Some investors are betting that a bottom had formed to the seven-month long rout on the market even as others remained pessimistic.

Brent crude oil futures opened at $55 a barrel on Tuesday (03 Feb, 2015), before edging back to $54.97 by 0125 GMT. U.S. WTI futures were at $49.94 a barrel, down from a high of $50.46 a barrel.

Prices jumped in the past two days after data showed the number of U.S. oil drilling rigs had fallen the most in a week in nearly 30 years. Month-end covering by traders taking profits on earlier short positions added to the rally.

Yet the demand side in Asia remained weak. Morgan Stanley said in a note that its China Pulse Business Condition Survey for Energy for last December recorded two thirds of respondents expected the sector's conditions to either worsen slightly or significantly, while only a third expected an unchanged outlook. Nobody saw conditions improving slightly or significantly.

Please read a full article at www.reuters.com