The first oil exports from Alaska in more than a decade are currently en route to South Korea. Meantime, the price of oil continues its slide.
The downward move is partly thanks to increased supply. An announcement Tuesday said OPEC oil supplies exceeded demand.
Investors are also growing increasingly confident that Islamic State does not pose a threat to oil supplies in the Middle East.
“We saw a spike in oil prices earlier in the summer because of what’s going on in Iraq and Syria, concerns that Islamic State might be able to grab oil supplies and cause some chaos in northern Iraq. That for the most part didn’t happen and now we’re seeing them being beaten back by US airstrikes,” said Rick Newman of Yahoo Finance.
Add to that increased supply from the U.S., including the growing possibility of exports, and supply seems more robust. For decades, the U.S. has banned the export of crude oil but has issued some exceptions to Alaska. But those exceptions have been rare – the current shipment to South Korea is the first since 2000, according to government records.
“We’re likely to see more and more of this…we’re going to see a lot more going from Alaska to Asia,” said Newman. This is the US energy revolution writ large.
So with supply surging, one would hope world demand is increasing as well – but that’s not the case right now.
“We just have a weak global economy, that’s really the biggest factor in oil prices.” Earlier this summer Brent crude prices hovered around $105. Now, they’re hovering around $90.
“That’s a pretty big drop from early summer that just tells you that there’s tepid demand in the global economy,” said Newman. “Low oil prices don’t cause problems in the global market but weak demand for everything, which is reflected in [low] oil prices, does.”
There is a silver lining for consumers, though, said Newman. “Gas prices are going to go down.”