The markets are off to a rough start this year. The U.S. stock market is having a tough year. The S&P 500 hit its lowest point in two years on Wednesday. Global markets are also feeling the pinch of low commodity prices. What’s causing the turmoil? Oil is to blame, hitting record lows as the world faces oversupply.
Oil came in at $27 a barrel this week, a price that could go even lower now that sanctions have been removed against Iran. According to International Energy Information, the lifting of economic sanctions against Iran means the market can expect an additional 500,000 barrels of oil per day in an already out-of-balance supply and demand situation.
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Commodities trader Scott Shellady, known at the Chicago Board of Trade for his cow print jacket, says the low price of oil might last longer than most analysts predicted. “We don’t have this demand for oil if we’re not growing,” Shellady says. “We keep taking it out of the ground, but we have nowhere to put it because nobody needs it.”
He says the only way the oil market will rebound is for oil-producing nations to get off the gas pedal of production so the world can start to use up the oversupply.