Oil prices tumbled Tuesday after the International Energy Agency revised down its demand projections for the rest of the year and into 2015.
The IEA said oil demand over the next two months would be 200,000 barrels per day lower than the amount it projected in the prior month’s report, falling to 92.4 million millions of barrels per day. Demand is expected to rise in 2015 to 1.1 millions of barrels per day, but that’s still about 100,000 millions of barrels per day less than earlier projections.
At the same time, the IEA reaffirmed a glut in the oil market driven by the shale boom in the United States and output from OPEC which surged to a 13-month high in September, led by “Libya’s continued recovery and higher Iraqi flows.”
Adding to the price woes: A recent decision by Saudi Arabia to accept a lower selling price for its customers in Asia and Europe. Saudi Arabia is the largest producer in the Organization of Petroleum Exporting Countries, the cartel which produces a third of the world’s oil supply and essentially keeps the balance of supply and demand in the market.
“There was no let-up in Saudi supply to global customers in September, according to tanker tracking data, with a modest pick up in shipments versus August,” according to the IEA report. “Riyadh appeared determined to defend its market share in the increasingly competitive Asian market — cutting its formula prices for a fourth consecutive month.”
The news of lower demand sent oil prices to their lowest level in four years.
Falling oil prices are good news for motorists, especially coming into the holiday travel season. Pump prices fell 1.3 cents to an average of $3.186 a gallon nationwide yesterday, according to AAA, the largest U.S. motoring group. Gas prices have fallen now for 18 days straight, according to the AAA, and were the lowest for a Columbus Day holiday since 2010.