Oil hits five-year low on Opec report and US concerns

Oil hits five-year low on Opec report and US concerns

The price of has fallen to fresh five year lows in the wake of two separate reports indicating a global supply glut.

Opec oil producers released a forecast indicating less global oil demand next year.

A separate US report, which showed a surprise increase in the country's crude oil supplies, also pushed prices lower.

The price of Brent crude has fallen 43% since mid-June.

In its report, Opec said that it expected demand for its crude oil to fall to 28.9m barrels per day next year, which is near ten-year lows.

Opec's official production target is 30m barrels per day, meaning significantly more oil would be on the market than was demanded.

In a separate note, the US Energy Department said there was a surprise increase in US crude stockpiles last week of 1.5m barrels.

Analysts had been predicting a decline of 2.2m barrels.

That increase has led to declining prices for petrol, jet fuel, and heating oil.

The Energy Department says that if its projections hold, the price of petrol in the US will fall by 23% to $2.60 per gallon next year, saving the average US household approximately $550 a year.

The decline in oil prices has hurt the share price of several large firms, from Exxon Mobil to BP, but helped businesses such as airlines where cheap oil prices can help buoy profits.

Shares in US carriers American Airlines, Delta, and United were trading higher on Wednesday, while oil shares fell sharply.

Source: BBC News