Oil prices entered into another free-fall Wednesday after U.S. supplies unexpectedly grew and OPEC dimmed its forecast for demand.
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West Texas Intermediate crude oil, the U.S. benchmark, slipped under $61 a barrel for the first time since July 2009. Oil for January delivery traded as low as $60.43 a barrel. The contract was down $2.88, or 4.5%, at $60.94 a barrel in recent trading.
The latest report on domestic crude inventories heightened concerns that global production is exceeding demand for oil. With traders eyeing a prolonged oil glut, thanks in large part to U.S. shale oil, futures have tumbled more than 40% since the early summer.
According to the Energy Information Administration, U.S. oil inventories ended last week at 380.8 million barrels, an increase of 1.5 million barrels. Industry watchers expected refiners and traders to have less oil on hand.
At the current level of stockpiles, American refineries could continue processing oil at the same pace for 23 days.
Meanwhile, U.S. oil production averaged 9.1 million barrels a day for the week ended Dec. 5. That reflects a 31-year high.
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Gasoline supplies also climbed last week, expanding 8.2 million barrels for the largest weekly increase since September 2001. New York Harbor gasoline futures recently dropped eight cents to $1.64 a gallon. AAA said retail gasoline prices averaged roughly $2.64 nationwide Wednesday morning, down 29 cents compared to last month.
The selloff in oil futures was kicked off by an updated forecast from the Organization of Petroleum Exporting Countries, which now believes demand for its oil will fall to its weakest level in 12 years.
OPEC sees demand retreating to 28.9 million barrels a day in 2015 versus 29.4 million this year.
The cartel traditionally scales back production to sustain higher oil prices. However, OPEC spooked the market -- and provided some holiday cheer for drivers -- last month when it decided to maintain output of 30 million barrels a day. The announcement fueled projections that an oversupply of oil would continue into 2015.
Earlier this week, Bank of America reacted to the decision by saying WTI oil could fall to $50 a barrel in the first half of 2014, while the international benchmark, Brent crude, may slump below $60. Brent oil was recently trading at $64.40 a barrel.
OPEC long downplayed the wide-ranging impact of shale oil development in the U.S. The group first acknowledged that U.S. shale plays could impact demand for OPEC oil in 2013, after referring to shale oil as “a source of marginal additions” in its 2011 World Oil Outlook.
Shale oil is extracted through a combination of hydraulic fracturing and horizontal drilling. North Dakota, Texas and other states have shown significant production growth, and the U.S. is now the world’s largest producer of oil.