The world's two benchmark oil prices plunged to more than five-year lows as rising crude production and waning global economic growth hit the globe’s basic industrial commodity from two sides.
Brent crude, named for an oilfield in the North Sea between the Scottish Shetland Islands and Norway, sank as low as $65.93 in New York morning trading today, the weakest it has been since October 2009.
Its American counterpart, West Texas Intermediate, dropped to $63.06, before recovering slightly, the lowest it has been quoted since July 2009.
Both 2008 prior low prices took place as crude oil was rallying from its crash to $32.40, in the aftermath of the financial crisis that fall, following the bubble peak of over $145.00 for both brands earlier that summer.
Brent and WTI have slipped 18 percent in November, partially due to the decision by the Organization of Petroleum Exporting countries (OPEC) to maintain its 30 million barrel a day production quota, instead reducing supply, as many expected in an attempt to support prices. OPEC has held its production at over 30 million barrels a day for six months.
WTI process have plummeted 41 percent per barrel since their mid-summer peak at $107.73; Brent charges have fallen just over 43 percent, from $115.66.
OPEC has custody of about 40 percent of the world's discovered reserves.
Fast gaining U.S. production primarily from shale oil fields made accessible by hydraulic fracking, has pushed domestic supply to 9.08 million barrels a day through November 28th, according to estimates from the Energy Information Agenc, a division of the Department of Energy. The is the highest total since weekly records began in 1983.
The U.S. is the world’s second largest oil producer behind Saudi Arabia. Russia is third.
Despite the rapid fall in oil prices and the generally higher cost of producing oil from shale fields, the number of operating drilling rigs in the U.S., rose to 1,575 through December5th, the first gain in three weeks, according to information from Baker-Hughes Inc.
In addition to rising supply, declining economic growth in the EMU, China, and Japan have diminished the demand for energy products.
In October the International Monetary Fund (IMF) reduced its projection for world economic growth in 2014 by 0.1 percent to 3.3 percent and by 0.2 percent for 2015 to 3.8 percent.
The euro area is forecast to expand just 0.8 percent this year and 1.3 percent next year. China, the fastest growing oil import market, is slated to expand its GDP 7.4 percent this year and 7.1 percent in 2015.
Japan will grow only 0.9 percent in 2014 and 0.8 percent in 2014, a drop of 0.7 percent and 0.2 percent in the IMF's projections most recent estimates.
The U.S. is expected by the IMF to run its annualized GDP at a 2.2 percent pace this year and 3.1 percent next.
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