Are Low Heating Oil prices here to stay for a while?
It's a question we have been asked a lot recently. Will the price of heating oil remain low? The fact is we don't know and I'm not sure anyone does.
The price of oil is a global issue and its price is affected by a multitude of variables, which makes making any definitive forecast very hard to do.
These variables include, the strength of the global economy, global demand for oil, natural disasters, global weather and war.
Since the summer of 2014, the global price of oil has reduced by up to 50%. The main reason for this is that there has been a surplus of oil in the global supply chain.
This excess in supply is why we have seen the price of heating oil, petrol, diesel and gas oil all come down in price. The good news is, this is great for the end user, whether that be a home owner who relies on heating oil to heat their home, a motorist who fills up their car with diesel or petrol or a farmer who fills up their tractor and farm equipment with gas oil.
One of the main factors for the surplus in global oil supply is the fact that the USA is producing Oil form shale exploration, this combined with a slow down in the Chinese economy and other major economies has led to a reduction in demand.
The real question on everyone lips now though, is how long will the lower oil prices last for?
Two months, six months, two years, who knows?
So why is this time different? Well in the past, OPEC, the cartel or the worlds largest oil producers, has previously stepped in to help control the global supply. They have done this by cutting production, which has stopped the global oil market having such a surplus.
However, in an unforeseen move at the back end of 2014, OPEC confirmed that it had no intention of cutting its oil production.
So without getting too involved in the politics behind the global supply of oil, it is quite understandable why this week, global prices for crude oil were just under $60 per barrel.