The international quotations for a barrel of oil brought prices to the lowest point in over a decade. A barrel of Brent crude dropped to its lowest point since 2003, now going for as little as $27.67.
However, the price of crude oil has recovered to around $28 a barrel. The international benchmark in this domain, Brent crude, improved to $28.86, BBC News notes. Meanwhile, US crude recovered to a price of $28.65 a barrel after having dropped to as low as $28.36.
According to industry analysts, the price of crude oil has reached this reduced value because of oversupply caused by concerns regarding Iran.
The state is under Western sanctions, and analysts fear that the price of a barrel of crude could fall even further when Iranian crude exports come back on the market. Iran has been under trade sanctions to prevent them from developing nuclear weapons.
An OPEC report estimates that the price of oil will be rebalanced during this year. However, the Organization forecasts that non-OPEC countries will be unable to sustain production if low oil prices continue. The oversupply of oil is caused by Saudi Arabia’s decision not to cut production, which could make the supply outstrip demand until 2018.
Around the same time in 2014, Brent crude oil had a price of around $110 per barrel. At the beginning of 2015, the price dropped to around $50 a barrel. Now, crude oil is around three times cheaper than a barrel needed to hold it, since a new steel drum with that capacity costs almost $100.
The measure of an oil barrel is defined as 42 US gallons, which is the rough equivalent of 159 liters. It has become an international standard since 1872 and is based on King Richard III’s English wine tierce. However, most modern oil drums have a capacity of 55 US gallons, although the UK uses a drum with 44 imperial gallons and the countries affiliated to the metric system use 200-liter drums. At the end of the day, everybody trades oil using barrels as a measurement standard.