OPEC Cuts Demand Forecast
OPEC cut demand forecast for its crude oil to a 12-year low, sending oil prices, energy shares and the overall stock market into a dive on Wednesday. West Texas Intermediate (WTI) traded at a day low of $60.43. On top of the OPEC demand cut, U.S. inventories increased on a day when expectations were for a decrease. The TSX fell 342.78 with energy stocks leading the crush. The Dow Jones Industrials, which has been flirting with 18,000, dropped 268 on Wednesday.
OPEC reduced its projection for 2015 by about 300,000 barrels a day to 28.9 million in its monthly report today, Bloomberg reported. Inventories of U.S. crude oil rose to the highest seasonal level in weekly data that started in 1982, the Energy Information Administration reported.
“We are still searching for the bottom, and may not find it until OPEC changes policy or low prices begin to eat into production,” Eugen Weinberg, head of commodities research at Commerzbank AG, told Bloomberg.
Saudi oil minister Ali Al Naimi told reporters at a UN global warming conference, “Why should I cut production?” A number of analysts believe Saudi is testing the sustainability of the U.S. shale boom by not being willing to cut its production, even under pressure from fellow OPEC members. “They are willing to let this thing crash and see what it does to U.S. shale producers,” one analyst said about the Saudi minister’s statement. Many traders and energy analysts have expressed similar sentiment in recent weeks, saying OPEC has lost its power, with Saudi calling the shots.
In spite of falling prices, U.S. oil output is forecast at the highest level since 1972, EIA Administrator Adam Sieminski said in a statement.
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