On Tuesday, crude oil futures dropped 4.6% to settle at $81.84 per barrel, the largest drop in percentage since Nov 2012 and the lowest settlement from June 28 2012.
Minutes before settling, crude continued with its losses to 4% in the biggest loss of a day from 2012, dropping as low as $81.54.
According to CNBC, Brent crude dropped $3.85 or 4.33% to stand at $85.04 per barrel.
The losses increased in mid-afternoon after a projection by the US Energy Information Administration that fast growing shale basis would increase output by 106,000 barrels per day in November.
The rise in US shale brings a collision with the diminishing outlook for demand, leading to the glut of crude, which has knocked the Brent lower by more than 255 from June.
The International Energy Agency has cut estimated for growth of global oil demand by 250,000 barrels per day for 2014 and by 90,000 barrels per day for 2015. Demand for OPEC oil is expected to be 200,000 barrels per day lower for 2014 and 2015.
Market Watch quoted Price Futures Group senior market analyst, Phil Flynn as having said, “More supply and less demand make for a much lower oil price.”
Market participants are still arguing that the recent selloff is approaching an overdone level and this has been steeper than expected due to the weak demand and high supply.
Adam Longson, analyst at Morgan Stanley said in a report, “The large downward move in oil over the past two weeks was mostly speculative in our view. While the market remains oversupplied and lower OPEC production should be required, we see few signs of new deterioration in fundamentals.”
Longson said OPEC is not wrong to expect improvement in demand and that he would not be surprised “if the cartel waits to see how markets evolve this winter before making any hasty decisions.
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