Crude Oil, having reached a highest price of USD 110.54 per barrel, earlier in the year, has since encountered a dramatic fall, currently trading at a staggering USD 78.89 per barrel. The irony of the matter is that the prices are expected to fall further. This is not my prediction but the words of airlines, trucking companies and other big energy consumers, who are betting on further oil price falls. These big players are reluctant to lock in at the current levels amidst fears prices could plunge if the global economy weakens deeper into the barrel.

The consumers of oil fear the slide in prices-largely because of the slow economic growth in China and the euro zone sovereign debt crisis-is only the beginning of a major sell-off. The reason being Saudi Arabia had boosted production to a 30-year high, further weakening the prices.

Analysts opine that consumers’ wait-and-see approach does not harbor well for future oil prices as it removes a key source of forward buying. It also mimics the behavior of big consumers in late 2008 at the start of the global financial crisis, when they moved to the sidelines as the prices plunged from an all time high of nearly $150 to a low of $45.

Brent Crude, the counterpart to the WTI version, has also fallen from a peak of roughly $125 a barrel in mid-March to $88.49 a barrel last week, the lowest since December 2010. However, oil prices have remained high by historical standards. Brent crude oil has averaged so far this year at $114.2 a barrel, the highest January-to-June average ever, surpassing the averages for the same period in 2008, when prices hit a record high, and in 2011, when the civil war in Libya cut oil supplies significantly.

Opinions are flowing in the market of a possible further fall in the crude oil prices. Yet-one thing is assured-we haven’t seen the last of the drama that is brewing up on both sides of the Atlantic. And the drama will surely add to the spice in the volatile crude oil markets in the days to come.

Note: The views expressed in the blog are the sole opinion of the writer and cannot be deemed responsible for any losses incurred.