With oil prices falling around the world, demand for oil pumped in the Middle East has reached a new low. The Organization of Petroleum Exporting Countries, or OPEC, recently reduced the amount of crude oil it estimated it would need to produce next year to satisfy global demand. The group lowered its forecast by about 300,000 barrels a day to 28.9 million barrels a day. That figure is about 1.15 million barrels a day less than what the cartel pumped in November.
The reduced demand has been blamed on oversupply in the market. Increased production in North America and reduced demand in other areas of the world have caused oil prices to plunge. This week, the price of benchmark Brent crude fell to a five year low to $65.29 a barrel. Futures for January delivery of light, sweet crude were trading at $62.55 on the New York Mercantile Exchange at last look.
Without a slowdown in the U.S. shale boom or production cuts from OPEC members, namely Saudi Arabia, there will be a hefty supply surplus for many months to come. OPEC has released a report indicating that it would not be cutting production to stabilize the falling prices.
Countries that pay a high price to pump their oil are going to end up the losers in this game. These countries often use new oil extraction technologies, such as fracking, to obtain the oil that they sell on the global market. Lower prices per barrel make these endeavors less profitable and a continuing drop in price may push oil companies in these countries towards bankruptcy.
Consumers may come out the winners in this global fight for market share. The price of a gallon of gasoline has decreased by nearly $1 since last year. Decreased spending on gasoline means more money to spend in other sectors of the economy.