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US refineries blamed for tanking oil prices

Last Updated Aug 3, 2016 at 7:38 am PDT

(iStock photo)

The price of crude oil has dropped below $40 US a barrel for the first time since April.

Analyst Roger McKnight predicts oils prices could fall below $32 US before recovering.

McKnight says American oil refineries are partly to blame for boosting production and oversupplying the market.

CALGARY, AB. (NEWS 1130) – One of the pillars of the Canadian economy, crude oil, fell below $40 US a barrel Tuesday for the first time since April.

According to energy analyst Roger McKnight with En-Pro International, the price of crude could drop as low as $32 US in the coming months.

McKnight says on top of record OPEC output, there is also a gut of gasoline south of the border just as the summer driving season winds down. With fewer people on the highways, he doesn’t see anything pushing up demand or reducing the surplus in the short term.

“This is not going away any time soon. Perhaps in the second quarter of 2017 we’ll see things getting back to logical numbers, but not this fall.”

McKnight argues American refineries are partly to blame, because they boosted production in the 4th quarter of last year.

“The refining margins in November and December of last year were astronomically high because crude prices were quite low so they just kept pumping and pumping and pumping gasoline because their margins were so great, now all of a sudden they look around and say ‘woah, our tanks are overflowing.'”

Oil prices skidded to a 13-year low in February before rebounding by more than 70 per cent. The drop cost the Canadian economy billions, and led to a crippling downturn in the western oil patch.