The 2014–2016 Oil Price Crash
The EIA Brent spot price fell from $115.19 on 19 June 2014 to $26.01 on 20 January 2016, a 77% drop. US crude output had grown by more than 3 million barrels per day in four years, and on 27 November 2014 OPEC decided not to cut production to make room for it. The slump ended only when OPEC and Russia agreed joint cuts in late 2016, creating the alliance now known as OPEC+.
The crash month by month
| Month | Brent | WTI | What happened |
|---|---|---|---|
| Jun 2014 | $111.80 | $105.79 | Peak; Iraq conflict worries |
| Nov 2014 | $79.44 | $75.79 | OPEC keeps its 30 mb/d ceiling (27 Nov) |
| Jan 2015 | $47.76 | $47.22 | First low |
| May 2015 | $64.08 | $59.27 | Short-lived rebound as US drilling slows |
| Dec 2015 | $38.01 | $37.19 | OPEC drops its ceiling; US export ban lifted |
| Jan 2016 | $30.70 | $31.68 | Bottom; Iran sanctions lifted |
| Jun 2016 | $48.25 | $48.76 | Recovery as US output falls |
| Dec 2016 | $53.31 | $51.97 | OPEC and non-OPEC cut deals |
Source: EIA Europe Brent and Cushing WTI spot prices, monthly averages. Annual averages for Brent: $98.97 (2014), $52.32 (2015), $43.64 (2016). Year detail: oil prices in 2015 and oil prices in 2016.
The shale boom
Horizontal drilling and hydraulic fracturing opened tight oil formations in Texas and North Dakota. Prices above $100 from 2011 to mid-2014 paid for rapid growth. According to the EIA, US crude production rose from 5.0 million b/d in 2008 to 8.8 million b/d in 2014 and 9.4 million b/d in 2015. US imports fell, and barrels that had once gone to the US had to find buyers elsewhere.
For a while, outages in Libya, Iran sanctions and other disruptions hid the surplus. By mid-2014, Libyan output was partly recovering, demand growth in China and Europe was slowing, and the dollar was rising. Inventories began to build.
OPEC's November 2014 decision
On 27 November 2014 OPEC met in Vienna and kept its production ceiling of 30 million b/d. Saudi Arabia, remembering how it lost market share by cutting alone in the early 1980s (see the 1979 crisis and its aftermath), refused to cut for the benefit of higher-cost producers. The EIA Brent spot price fell from $77.39 the day before the meeting to $71.89 on 28 November.
The strategy assumed shale would collapse quickly at low prices. It did slow, but less than expected. Producers cut costs, focused drilling on the best acreage and improved well productivity. In December 2015 OPEC stopped setting a group ceiling altogether.
Late 2015 and early 2016: the bottom
Several events in quick succession pushed prices to their lows:
- 18 December 2015: the US Congress lifted the 40-year ban on crude oil exports, allowing US oil to compete directly in world markets.
- 16 January 2016: nuclear-related sanctions on Iran were lifted, and Iran began restoring exports.
- Storage: US commercial crude stocks were at multi-decade highs, and the futures curve was in steep contango.
Brent spot hit $26.01 on 20 January 2016 and WTI spot $26.19 on 11 February 2016. Talks in Doha on 17 April 2016 on a production freeze failed, but prices were recovering anyway, as US output fell from 9.4 million b/d in 2015 to 8.9 million b/d in 2016.
The birth of OPEC+
On 28 September 2016 in Algiers, OPEC agreed in principle to cut output. On 30 November 2016 it set the details, a cut of about 1.2 million b/d. On 10 December, 11 non-OPEC producers led by Russia pledged a further cut of about 558,000 b/d. The joint framework, the Declaration of Cooperation, took effect in January 2017 and is the basis of today's OPEC+.
Who won the price war?
In the short term, consumers did. US regular gasoline averaged $2.43 a gallon in 2015 and $2.14 in 2016, down from $3.36 in 2014 (EIA). Producer economies such as Russia, Nigeria, Venezuela and Saudi Arabia faced large budget deficits.
In the long term, shale survived. US production fell for one year, then reached 11.0 million b/d in 2018 and 13.7 million b/d in 2025, according to the EIA. The episode showed that US shale can respond to prices within months, which puts a soft ceiling on rallies. See US oil production and US oil facts and figures.
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2014–2016 oil crash FAQ
Why did oil prices crash in 2014?
US crude production grew by more than 3 million barrels per day between 2010 and 2014, demand growth slowed and the dollar strengthened. On 27 November 2014 OPEC chose not to cut output to defend market share. The resulting surplus filled storage and pushed Brent from $115 in June 2014 to $26 in January 2016.
How low did oil go in 2016?
The EIA Brent spot price fell to $26.01 per barrel on 20 January 2016, and WTI spot to $26.19 on 11 February 2016. Brent averaged $43.64 for 2016 as a whole, its lowest annual average since 2004 at that time, before the OPEC+ cuts lifted prices.
What did OPEC decide in November 2014?
At its meeting in Vienna on 27 November 2014, OPEC kept its production ceiling of 30 million barrels per day instead of cutting. Saudi Arabia wanted higher-cost producers, especially US shale, to absorb the surplus. Brent fell about 7% on the following trading day.
How did the 2014 crash lead to OPEC+?
After two years of low prices, OPEC agreed on 30 November 2016 to cut about 1.2 million barrels per day, and 11 non-OPEC countries led by Russia pledged about 558,000 barrels per day on 10 December 2016. This Declaration of Cooperation became the OPEC+ alliance.
Related pages
2015
Brent and WTI prices in 2015 month by month: the shale glut, OPEC's market-share strategy, the US export ban lifted and a slide below $40.
2016
Brent and WTI in 2016 month by month: the January low near $27, the recovery, and the first OPEC+ production agreement signed in December.
OPEC+
What OPEC+ is, its member countries, how production quotas and voluntary cuts work, compliance, spare capacity and the alliance's effect on oil prices.
US Oil Production
US crude oil production explained: record output, the Permian, shale breakevens, the rig-production lag and how US supply caps oil price rallies.