Forecasts of a mild winter in the United States, together with plentiful stockpiles there and speculation OPEC will exceed its production target have caused oil prices to dive. In the US, some forecasters are predicting that the El Nino weather pattern will cause a mild winter in the northern part of the country.
While in London Brent remained near 58 dollars a barrel, US light crude at one stage dropped below 55 dollars, lower than it was one year ago. At the start of the year it was just over 66 dollars and it hit a high of 78.40 in July.
As well as the warm weather in the US, the markets remain convinced that the Organisation of Petroleum Exporting Countries will not cut production as much as it has pledged. Producers had agreed to reduce output by 1.2 million barrels a day from the start of this month. But consultantancy firm Oil Movements said it has calculated OPEC’s November shipments will actually rise.
In addition, there was a technical market reason for the price decline. The contracts for crude oil to be delivered in December expired on Friday, so speculators, who had bet that prices would continue to rise, either had to sell or take delivery.