PORTLAND, Ore. – Energy industry shares fell Wednesday as oversupply and weak demand continued to drag down the price of oil.
Oil prices have been falling for months, but new industry reports suggest it could fall further.
OPEC on Wednesday slashed its estimate of how much crude oil it will need to produce next year. And the Energy Department on Wednesday reported a surprise increase in U.S. crude supplies. That follows the U.S. Energy Department lowering its forecast this week for gasoline prices yet again.
The spate of news helped send the price for U.S. benchmark oil down to five-year lows Wednesday. Benchmark U.S. crude slumped 4 per cent Wednesday, or $2.60, to $61.23 a barrel. Prices have not been that low since July of 2009. U.S crude prices have fallen 17 per cent in two weeks.
Global oil supplies are high due to rising production in the U.S., while global demand is relatively weak because of slow economic growth. That is creating a glut of oil and lower crude prices, and it is causing oil companies to scale back drilling plans for next year.
Oil giants BP and ConocoPhillips both lowered their spending forecasts this week.
BP said Wednesday that it will take $1 billion in restructuring charges over the next year and is considering reducing its spending on development by as much as $2 billion in 2015. And ConocoPhilips said earlier in the week that it would cut capital spending next year by 20 per cent.
The mounting pressure sent shares of most major oil companies down in trading Wednesday, including declines of roughly 3 per cent for Exxon Mobil Corp., ConocoPhillips and Chevron Corp. in midday trading.
Shares of service and equipment companies that are tied to the oil industry also took a hit, such as drilling company Schlumberger Ltd., whose shares also sank more than 3 per cent.
While all this news has hurt the energy industry, it has helped consumers by ultimately lowering the price they pay at the pump for gasoline. The U.S. now believes a gallon of gas will average $2.60 in 2015, 23 per cent below this year’s projected average.