Yesterday, West Texas Intermediate (WTI) crude prices tumbled the most since 2012 after the International Energy Agency (IEA) cut its oil demand growth expectations for 2014 for the fourth successive month. At around $82 a barrel, the benchmark has fallen approximately 26% from its 2014 high in June.
IEA Sees Slowest Oil Demand Since 2009
Paris-based EIA – the energy-monitoring body of 28 industrialized countries – projects that oil consumption this year will increase at the slowest rate in five years. The energy watchdog, in its eagerly awaited ‘Oil Market Report’, said that global oil demand would increase by 700,000 barrels per day annually, reaching 92.4 million barrels a day in 2014. The agency’s current estimate for 2014 is lower by 200,000 barrels a day from its last report.
No End in Sight
Crude prices are already in a bear market, reeling from the effects of booming shale supplies in North America, weakening growth in China and a stagnant European economy.
Moreover, a stronger dollar made the greenback-priced crude dearer for investors holding foreign currency.
Finally, with OPEC members more intent on preserving market share rather than attempting to arrest the price decline through production cuts, the negative sentiment has only intensified.
Stocks Sink to New 52-Week Lows
With crude sliding to multi-year lows, energy stocks – particularly those in the exploration and production (E&P) sector – have been in a free fall with many hitting their 52-week lows. S&P components like Chevron Corp. (CVX), Apache Corp. (APA), Noble Energy Inc. (NBL), Chesapeake Energy Corp. (CHK), Pioneer Natural Resources Co. (PXD), Murphy Oil Corp. (MUR) and Southwestern Energy Co. (SWN) were all trading at their lowest price in over a year.
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