The third quarter was just awful for oil prices. The price of global oil benchmark Brent crude oil dove 14% on the quarter to around $95 per barrel. Meanwhile, U.S. benchmark WTI crude oil fell 13.8% on the quarter to just over $91 per barrel. This hit investors pretty hard as it sent oil stocks lower as well.

Brent Crude Oil Spot Price Chart

Brent Crude Oil Spot Price data by YCharts

Overall the third quarter was the worst quarter for oil prices since 2012. Not only have oil prices matched the low set in November 2012, but oil prices endured their steepest decline since the second quarter of 2012.

Why oil prices plunged this quarter

Surging oil production around the world is a leading cause of the recent collapse of oil prices. The latest news to batter oil prices stems from reports that production from OPEC members is at its highest in nearly two years. According to reports, OPEC's production is now up to 31 million barrels of oil per day. That's well above the forecast for demand for OPEC's oil of 29.2 million barrels per day, and comes despite calls for it to cut back production amid lukewarm demand for oil around the globe.

This is on top of oil production in North Dakota's Bakken Shale hitting a new record high this quarter of more than a million barrels of oil per day. Not to mention the fact that oil production is surging across all other U.S. tight oil plays.

The following chart shows that oil production in the Bakken, Eagle Ford, Niobrara, and Permian Basin tight oil plays have all increased over the past year.

Oil Prices Us

Source: U.S. Energy Information Administration. 

The rise in U.S. oil production has been dramatic over the past few years to say the least. As the following slide shows, oil production from America's tight oil plays alone is now bigger than the production of most OPEC nations.

Oil Prices Pioneer Natural Resources

Source: Pioneer Natural Resources Investor Presentation 

This surge in production combined with the fact that OPEC is now back to peak production has really hit oil prices hard this quarter. This is coming at a time when demand for oil, particularly in Asia, hasn't been as high as expected as economic growth has been slower than forecasted. Meanwhile, foreign oil import demand from the U.S. is at its lowest point in years.

What's next for oil prices?

Oil prices could have further to fall, especially in the U.S., as oil production from tight oil plays is only expected to keep rising. That being said, oil producers are cutting back elsewhere. Offshore oil projects in particular have seen capital spending dry up, causing a big storm in the offshore rig market. Overall, capital spending from big oil companies is falling as oil giants were struggling to make money even when oil was over $100 per barrel as surging costs hit profitability. The hope is that by cutting investments to grow oil production, it will slow the growth of new supplies until oil prices begin to move higher once again.

Meanwhile, most OPEC members favor oil prices of at least $100, as this is a key level to support the budgets of many members. This is why OPEC, too, might cut investments, which will cut production. By cutting production it would tighten up the supply of oil a little bit and at least put a floor under oil prices, if not cause prices to start moving higher again. 

Oil prices are getting crushed, causing oil producers from OPEC to big oil to rethink their production plans. So, while oil prices might have more room to fall in the near term, oil producers won't let prices get too low before they really start cutting back production. 

Matt DiLallo has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.