Oil Prices Weigh On Market

Oil Prices Weigh On Market

Stocks on Wall Street opened lower on Wednesday after oil prices dropped again.

Oil Prices Weigh On Market
Oil Prices Weigh On Market

The renewed oil decline affected energy companies’ spending budgets. New York Mercantile light sweet crude for January delivery lost 1.9% to reach $62.61 per barrel, while Brent crude for January delivery fell 1.71% to $65.70 per barrel. The S&P 500 and Dow both opened 0.3% lower, while the Nasdaq declined 0.1%.

Combined with political turmoil in Greece and economic interventions in China, oil’s persistent price drop is another hurdle for a stock market that has had a sluggish start to the week.

“After inching within a hair’s breadth of the 18,000 mark, the Dow has been unable to cling onto its record highs in the face of a new deluge of bad world news,” Connor Campbell, financial analyst for SpreadEx, told MarketWatch.

OPEC cuts global demand outlook
The Organization of the Petroleum Exporting Countries (OPEC) reduced its forecast for its oil’s global demand in 2015, according to the Wall Street Journal. Despite the expected lack of demand, OPEC elected in November to maintain its production rate of 30 million barrels a day – a move that surprised analysts and elicited concerns over an overstocked market.
The group said demand for its oil will drop from 29.4 million barrels a day in 2014 to 28.9 million barrels in 2015. As a result, energy companies across the world have rushed to alter production and spending forecasts to match demand.

“For as long as OPEC continues to refuse to do its bit to curb this oversupply, non-OPEC producers will have to do the lion’s share to rebalance the market,” Commerzbank explained to the Wall Street Journal. “Low prices are required to force this to happen. It is therefore all but impossible to tell where the oil price might bottom out.”

The US Energy Information Administration pulled back its forecast for international oil consumption for 2015 to 92.32 million barrels a day, as opposed to a prior forecast of 92.5 million barrels a day.

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