Crude oil drops below US$60, global oil demand outlook cut fourth time in 5 months

15-Dec-14

Oil extended losses to a five-year low with oil on the Nymex for January delivery falling to US$57.8 a barrel. Brent dipped to US$61.8, its lowest level since July 2009. Crude oil plunged further as International Energy Agency cut its outlook for the fourth time in five months, saying that world oil consumption will expand by 230,000 bpd less than estimated in November. As per the International Energy Agency (IEA), 2015 will see weaker consumption coupled with rising supplies from non-OPEC countries. USA is producing the most oil in three decades and OPEC members have pumped more than the group’s target level for each of the past six months. Currently, Brent crude is too low for 10 of OPEC’s 12 members to balance their budgets, yet not low enough to force producers to scale back output. Most of the reduction in 2015 outlook is attributable to Russia, where sanctions are hurting growth. Russia’s currency is on the way to its worst year since the nation’s 1998 default, amid falling oil prices and sanctions over the conflict in Ukraine. Oil demand from growing economies is also dipping amid a switch to more efficient vehicles. Automobile mileage efficiency has gone up by 28% since 2007.