Brent Crude Oil (The British Standard) has dropped below $31 per barrel and some analysts are predicting the price dropping as low as $25 per barrel.
This is the lowest oil prices have been in the last 12 years.
There are a number of reasons behind this drop. The general reason being that global supply is higher than demand. US oil production has doubled over the last few years with the shale oil industry coming into fruition. The US dollar index has been high and this pushes down crude oil prices. Crude oil is traded in US dollars therefore any changes in the rate of the dollar will directly influence the price of oil.
US demand for overseas oil supply is falling due to the oversupply and therefore OPEC and Russia are having to compete with each other for a share in the Asian market. There is a huge slow down in economic growth - especially in China - which also has a huge impact on global oil demand. If economic growth is down then there is a lower demand for oil.
Despite all of the above, oil output across the world is still rising. Canadian and Iraqi output is rising and Iran will soon have its sanctions lifted and will start exporting again. With tensions between Saudi Arabia and Iran high, it's unlikely they will cut output and surrender their share of the markets.
In the 1980s oil glut, OPEC cut production to push prices back up, but lost a portion of their market share. They don’t want that to happen again.