High Supply, Low Demand Outlook Push Current Oil Prices Lower

Current oil prices dropped after a huge spike during the previous day because of a high-supply-low-demand outlook.

On the New York Mercantile Exchange, the price of the U.S. benchmark for delivery in December was 53 cents lower, at $88.18, during the late afternoon trading, Bangkok time. The contract gained 3.5 percent, or $3.06, to settle at its current oil price of $88.71 per barrel on the NYMEX.

The crude price per barrel of the U.S. benchmark is projected to be lower by around 5 percent in 2013 compared to the previous forecast in the midst of a weak economy, according to the report of the U.S. Energy Information Administration. Moreover, oil output is expected to increase by 8.2 percent from its level this year, said the EIA. That is the highest production growth since 1993.

Sufficient supplies and lower demand are the factors that are currently exerting the most pressure on the price of oil.

Chief Market Analyst Ric Spooner of Sydney’s CMC Markets said that oil prices which have, arguably, been very high, have moved lower to a rate that is widely considered more neutral.

On London’s ICE Futures Exchange, the crude price per barrel of Brent, the benchmark used to assign prices to international oil blends and grades, shed 38 cents to $110.69.

Elsewhere in the commodities market, wholesale gas dropped a penny to $2.689 per gallon. Heating oil shed 0.9-cent to a price of $3.044 per gallon. Meanwhile, the price of natural gas is $3.577 per thousand cubic feet, reflecting a 4-cent decline.