Oil Drops Further on Increased US Supplies, OPEC Report

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Oil Drops Further on Increased US Supplies, OPEC Report

Oil prices went into another free-fall after US supplies grew unexpectedly and OPEC dimmed its forecast for oil demand.

The US Energy Department announced a surprise increase in domestic oil inventories while OPEC projected that next year, the demand for crude would sink to levels that have not been seen in over a decade.

According to Fox Business, West Texas Intermediate crude oil, the US benchmark, dropped below $61 per barrel the first time from Jul 2009. January delivery oil traded at a low of $60.43 per barrel. The contract dropped 4.5% or $2.88 at $60.94 per barrel.

Traders have been eyeing the prolonged oil glut, fueled by US shale oil, which has seen oil futures tumbling more than 40% from early summer.

The Energy Information Administration reported that inventories for US oil ended last week at 380.8 million barrels, an increase of 1.5 million barrels. Industry watchers have been expecting refiners and traders to have less oil in hand.

As reported by ABC News, Stephen Schork, energy analyst and trader said that he is expecting the combination of growing global supplies and weak economic news in Asia to push oil lower to below $60 by the end of the week.

He said, “It’s the proverbial ‘trying to catch a falling dagger’ and I’m not going to try to catch it.”

At the current stockpiles levels, American refineries might continue processing oil at the same pace for around 23 days.

The US oil production has averaged 9.1 million barrels per day for the week ended December 5, reflecting a high of 31 years.

Gasoline supplies climbed last week, growing 8.2 million barrels for the largest weekly rise since September 2001. New York Harbor gasoline futures dropped to $1.64 per gallon by eight cents. AAA said retail gasoline prices averaged around $2.64 nationwide on Wednesday morning, dropping 29 cents in comparison to last month.

To contact the reporter of the story: Jonathan Millet at john@forexminute.com