OIL GLUT PUSHES PRICE DOWN
Oil is in the middle of one of its steepest sell-offs since the financial crisis, with prices on the international market falling drastically from its June price of $115 a barrel.
There are two explanations: not enough demand or too much supply. Supporting the weak demand argument are a stagnant economy in Europe, slower growth in China and flat gasoline consumption in the U.S. According to the International Energy Agency, in 2014 world demand for oil will grow only 1.5%. But the bigger factor appears to be surging global oil production, which outpaced demand last year and is shaping up to do so again in 2014. To try to keep prices high, Saudi Arabia, the world's biggest petroleum exporter, has reduced its oil production from 10 million barrels a day – a record high – in September 2013 to 9.6 million as of September 30. That hasn't done much to raise prices, mostly because other OPEC countries are pumping more crude as the Saudis try to slow down. Sharply higher production increases from Libya and Angola, along with surprisingly steady flows out of war-torn Iraq, have pushed OPEC's total output to almost 31 million barrels a day, its highest level this year and 352,000 barrels a day higher than last September.