Global glut of crude oil is forcing prices to the floor

The world is awash in oil, and the glut shows no signs of letting up.

In the past, slumps in the price of crude have prompted major producers like Saudi Arabia to cut back output in order to tighten supplies, thereby boosting prices. But as American and Canadian producers have expanded production, Middle East producers continue to pump, hoping the crash in prices will push higher-cost North American producers out of business.

So far, the strategy seems to be backfiring.

"Basically their intent was to drown us (in oil), but they've not got that done," Continental Resources CEO Harold Hamm told CNBC on Tuesday. "It's been a monumental mistake for them — I might add, a trillion-dollar mistake."

Crude oil prices leveled off at about $32 per barrel on Tuesday, after falling close to a 12-year low.

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Market watchers continue to slash their forecasts for oil prices. Closely followed market watcher Dennis Gartman told CNBC the price could drop to $15 a barrel, while Standard Chartered warned its clients that crude could fall to $10 this year.

At the same time that production continues to grow, global consumption is softening — in part due to an economic slowdown in China and much of the developing world.

In the United States, falling prices have forced producers to idle exploratory drilling rigs and cut back investment in new discoveries. But production from existing wells has barely changed. The result is that stocks of crude and petroleum products are well above five-year highs.

Worldwide production continues to rise. Aside from increased Saudi production, OPEC's second biggest producer, Iraq, plans to export a record 3.6 million barrels per day from its southern terminals next month, sources told Reuters. Iranian oil exports are also expected to rise later this year as Western sanctions against that country are lifted.

Though there are no signs that crude production will slow down, the crash in prices is taking a toll on major oil-producing economies. Saudi Arabia, which depends on oil revenue for the bulk of its government spending, has slashed various domestic subsidies and announced plans to raise taxes.

For consumers, the drop in crude oil prices has brought a windfall at the gas pump.

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The average price for a gallon of regular gasoline this year was the second-lowest of the last 10 years, according to AAA, which tracks national and local pump prices. Gas is cheaper than it's been since 2009, when the Great Recession sidelined millions of workers and prompted many people to cut back on driving.

The annual average price stands at $2.40 per gallon — or about 94 cents less than 2014.

Many economists expected that savings to help boost consumer spending, but most households seem to have pocketed the savings.

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Since mid-2014, when oil prices began falling, U.S. households have saved roughly $115 billion a year, while the level of personal savings rose by $120 billion, according to Steve Murphy, an economist with Capital Economics.

That suggests "that households have saved every last dime from lower pump prices," Murphy said. Last year, "it could be argued that households were reluctant to spend their gasoline savings if they thought it was a temporary windfall. But the longer prices remain low, the harder it is to make that case."