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Oil Prices Plunge as OPEC Declines to Cut Output
Oil futures in the U.S. dropped below $70 per barrel for the first time in four years after the Organization of the Petroleum Exporting Countries decided on Nov. 27 not to cut production.
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Oil futures in the U.S. dropped below $70 per barrel for the first time in four years after the Organization of the Petroleum Exporting Countries decided on Nov. 27 not to cut production.
The cartel's decision means retail fuel prices will continue to decline.
West Texas Intermediate, the U.S. standard for petroleum prices, fell 6% to about $69 yesterday. Brent crude, the international standard, sagged nearly 7% to close at $72.58 per barrel. Both measures have dropped more than 30% since June.
OPEC, which pumps about 40% of the world's crude oil, says it will maintain the official output quota it set three years ago: 3 million barrels per day. Analysts estimate the cartel is actually producing about 3.3 million bpd and would need to cut output by more than 1 million bpd to affect oil prices.
Prices have dropped because of slow global economic growth, the increasing fuel efficiency of vehicles and increases in local production by non-OPEC members, notably the U.S.
Saudi Arabia, OPEC's biggest producer, has resisted the call to cut output in favor of strengthening its market share. Analysts say continued low prices for petroleum will hurt economies that rely on oil sales, especially Russia and Venezuela.
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