New York City, New York – (StockNewsDesk) – 12/11/2014 — Yet again crude oil became a primary reason for the correction in global markets and this time the U.S. markets were not spared. The U.S. markets fell after the policymakers reported the crude oil inventories figures. These figures prompted the crude oil prices to fall in excess of 4%, taking the crude oil prices to $61 a barrel. The stance taken by Organization of Petrol Exporting Countries (OPEC) of not reducing the supply of crude oil also ticked off the crude oil price over 5-year lows.
The major indices of the U.S market, S&P 500, the Down Jones and the Nasdaq, all fell over 1% as reports released by the U.S. policymakers hinted towards the fact that crude oil prices might not increase anytime soon.
Increase in U.S. Crude Oil Inventory
As per the report, crude oil inventories in the U.S. market increased well above expectations to 1.5 million barrels. The Street expected a negative growth of 2.5 million barrels. Inventory coming above expectations by such as huge margin points towards a slowing demand and excess supply of crude oil, which ultimately will trigger a further fall in crude oil prices. On an aggregate basis, U.S. crude oil inventories stood at 380.8 million. In addition to this, gasoline report which shows the gasoline consumption by people, also came in well above expectations. Total motor gasoline inventories increased by 8.2 million barrels. This was nearly three times the expectations of 2.6 million barrels. Inventory for distillate stockpiles increased by 5.6 million barrels.
Disappointing OPEC Estimates
According to a report released by the OPEC countries, aggregate crude production declined by 390,000 barrels a day to 30.05 million barrels for the month of November. Libya saw a maximum reduction in the crude oil production. The country cut its production by nearly 248,300 barrels a day totalling to 638,000. Crude oil production for the largest crude oil producer of the world, Saudi Arabia, declined by 60,100 barrels a day, taking the figure of production to 9.59 million barrels a day. On the other hand, Kuwait saw a decline of 59,400 barrels a day to 2.69 million barrels a day.
OPEC countries declined their forecast to 28.9 million barrels a day from earlier estimation of 29.4 million barrels. This fuelled investor concerns over gradual stagnation of global growth. However, at the same time, OPEC countries also affirmed its output target of 30 million barrels a day in reply to boom of U.S. shale business. The U.S shale business has grown at its fastest pace in three decades. Hence, OPEC countries, with a fear of losing market share, decided not to lower the production on a global scale.