The price of oil fell to its lowest closing price in almost six-and-a half-years Wednesday, on new data showing that U.S. crude inventories rose at a time of year when they are typically in decline.
Oil supplies typically decline in the spring and summer, because refiners make more gasoline to meet driving demand in the summer. That’s what analysts expected to see in the latest weekly report from the Energy Information Administration. But instead, the agency said commercial inventories increased by 2.6 million barrels last week. That was a jolt to analysts and investors who have seen the price of oil plunge because there’s too much supply on the market and not enough demand.
Energy companies invested heavily in drilling over the past few years, when the price of oil was generally over $100 a barrel. A combination of increasing supplies and slow growth in the world economy, including weaker growth in China and a shrinking economy in Japan, cut into demand and made for a big drop in prices in the second half of 2014. That trend resumed this summer, and energy companies have slashed jobs and curtailed drilling activity in response.