Crude Oil Suffers Steep Decline
Oil has been in a bear market since last month and the trend continued today with a huge drop in the price of oil.
By Peter Martin
Friday, November 14, 2014 - 00:00
This despite comments from Saudi Oil Minister Ali Al-Naimi yesterday that speculation of a battle over market share within OPEC ‘has no basis in reality’.
‘Saudi oil policy has remained constant for the past few decades and it has not changed,” Mr Al-Naimi claimed at a conference in Mexico. ‘We want stable oil markets and steady prices, because this is good for producers, consumers and investors.’ The slightly ambiguous wording in these remarks has done little to dispel expectation in the market that OPEC will not cut oil output at its November 27 meeting in order to combat oversupply. OPEC released its monthly report yesterday which showed its member states supplied 30.253 million barrels of oil in October, exceeding its target of 30 million barrels.
This perception of a supply glut in global oil supplies has dominated the price of US light crude oil, despite inventory data from the Energy Information Administration (EIA) showing a drop in the US stockpile of crude oil last week. The weekly petroleum status report showed refineries are starting to ramp up production following the customary Autumn maintenance phase, operating at 90.1% of capacity; crude inventories fell by 1.7 million barrels, though at 378.5 million barrels the total remains in the upper half of the average range for this time of year. Significantly, supplies at the hub in Cushing, Oklahoma, which is the price settlement point for WTI crude oil futures, increased last week from 20.8 million to 22.5 million. US light crude oil futures plummeted more than 3% today fall below $75 a barrel.
Stock indices erase gains
The sinking price of oil has dragged down the share price of energy companies, with Dow components Exxon Mobil( $XOM) and Chevron ($CVX) both dropping more than 1%, and this played a part in stock indices giving up substantial gains made earlier in the trading day. By mid-afternoon in New York, the Dow Jones was up 0.04% at 17,619 and the S&P 500 was down 0.22% at 2033.8. Both stock indices had earlier set intraday records after Wal-Mart ($WMT), the world’s largest retailer, announced better-than-expected quarterly earnings.
Jobless claims data for last week, released before the market open this morning, were not encouraging. The number of initial claimants rose 12,000 to 290,000, exceeding the consensus estimate of 280,000, which hauls the four-week average up to 285,000 from 279,000 in the week prior, the highest four-week average see in more than a month. Continuing claims also swelled, climbing 36,000 to 2.392 million.
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