Crude Oil Plunges To End Below USD61 On Supply Glut, Waning Demand

WASHINGTON (Alliance News) - US crude oil plunged to new depths on Wednesday, after a report from ...

Alliance News 10 December, 2014 | 7:58PM
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WASHINGTON (Alliance News) - US crude oil plunged to new depths on Wednesday, after a report from the Energy Information Administration showed crude stockpiles in the US to have declined more than expected last week, even as the Organization of Petroleum Exporting Countries slashed its global demand outlook.

Earlier today, a weekly report from the US Energy Information Administration showed US crude oil inventories to have increased by 1.5 million barrels in the week ended December 5, while analysts expected a decline of 2.5 million barrels. The report showed US crude oil inventories at 380.8 million barrels, end last week.

Gasoline stocks jumped by 8.2 million barrels last week, while analysts anticipated a gain of 2.6 million barrels. Inventories of distillate, including heating fuel, increased 5.6 million barrels last week.

Industry data from the American Petroleum Institute said Tuesday that crude inventories in the US jumped 4.4 million barrels last week.

Meanwhile, OPEC slashed its forecast for crude oil demand in 2015 to the lowest in 12 years. The cartel lowered its demand projection for 2015 by about 300,000 barrels a day, to 28.9 million a day.

Going by the current trend, analysts at Bank of America believes the OPEC is on the verge of dissolving and oil prices would likely slide to USD50 a barrel.

Recent reports indicate producers of massive quantities of oil such as Saudi Arabia will be content to drive away competition from alternative fuels and cripple smaller oil producing countries with low prices.

Light Sweet Crude Oil futures for January delivery, the most actively traded contract, plummeted USD0.77 or 4.5% to close at USD60.94 a barrel on the New York Mercantile Exchange Wednesday.

Crude prices for January delivery scaled a high of USD63.43 a barrel intraday and a low of USD60.43.

On Tuesday, crude oil futures ended at at USD63.82 a barrel, up USD0.77 or 1.2%, as the dollar weakened against some major currencies with global equity markets declining on developments in Greece and China tightening rules on short-term loans.

The dollar index, which tracks the US unit against six major currencies, traded at 88.28 on Wednesday, down from its previous close of 88.66 late Tuesday in North American trade. The dollar scaled a high of 88.81 intraday and a low of 88.26.

The euro trended higher against the dollar at USD1.2441 on Wednesday, as compared to its previous close of USD1.2375 late Tuesday in North American trade. The euro scaled a high of USD1.2447 intraday and a low of USD1.2363.

In economic news, inflation in China dropped to 1.4% in November, a five-year low, from 1.6% in October, the National Bureau of Statistics said Wednesday. It was forecast to remain unchanged at 1.6%.

Producer prices declined 2.7% in November from last year, which was faster than a 2.2% fall seen in October and the 2.4% drop forecast by economists.

Elsewhere in Asia, consumer confidence in Japan dropped unexpectedly in November, data from the Cabinet Office showed Wednesday. The consumer confidence index dropped to 37.7 in November from 38.9 in the previous month. Economists had forecast the index to rise to 39.5.

From Europe, the UK visible trade deficit narrowed to a seven-month low in October, due mainly to a fall in fuel imports, the Office for National Statistics said Wednesday. The visible trade gap fell to GBP 9.6 billion, the lowest since March, from GBP 10.5 billion in September. It was expected to decrease to GBP 9.5 billion.

Meanwhile, the British Chambers of Commerce downgraded the growth outlook for the UK citing slower than expected growth in services, household consumption and exports. The business lobby lowered its 2014 growth forecast to 3% from 3.2% and the forecast for 2015 was downgraded to 2.6% from 2.8%.

Copyright RTT News/dpa-AFX

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