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Oil Speculators (Mostly) Saw the Massive Price Drop Coming

Oil Speculators (Mostly) Saw the Massive Price Drop Coming
Photograph by Getty Images

The drop in oil prices has been stunning, with both U.S. and international crude pushing a 40 percent decline since June. Attention so far has been on supply and demand getting out of whack: The world has more oil than it actually needs, with various estimates of the surplus falling anywhere from 700,000 to more than 1 million barrels of daily production.

The U.S. is mostly to blame. The shale boom has poured an extra 4 million barrels of oil into the world since 2008. That helped the market weather chaos elsewhere, keeping oil prices remarkably flat. But the trend has been clear for a while now, and plenty of smart analysts have been talking for more than a year about the potential for much lower prices.