Today was another big day for energy news: Oil prices fell to a new five-year-low, below $61 per barrel on world markets; the U.S. said its supplies of crude oil increased last week; and OPEC said it expected lower demand next year.
The news prompted a selloff on Wall Street. Jim Paulson, chief investment strategist at Wells Capital Management, tells our NPR’s Newscast unit investors fear global economic tumult.
“Do you want to be in the equity markets if the world economy is rolling over? I think that’s what it is,” he said. “I don’t necessarily agree with that. I think the real catalyst has to do with other things like the strength of the U.S. dollar than it does with the overall global economy falling off a cliff.”
The Wall Street Journal provides background:
“As prices have plunged more than 40% in about six months, market watchers have scrambled to adjust forecasts and explain the glut of oil that is forcing producers to cut prices as they compete for buyers. Supply growth, particularly in the U.S., exceeded expectations, while demand growth has been moderate due to a slowdown in China and Europe.”
The Organization of Petroleum Exporting Countries, which last month said it would keep production levels steady despite falling prices, said today that demand for oil globally would be lower than expected. The cartel accounts for a third of global oil production and some of its members want to dramatically cut production in order to counter falling oil prices.
Separately, the U.S. Energy Information Administration said oil supplies in the country rose last week by 1.5 million barrels. The Wall Street Journal reported that analysts had expected a decline in stocks. Domestic crude oil output, meanwhile, is at its highest level since 1983.
One benefit of all this: lower prices at the pump.