Investing.com -- Crude oil prices fell precipitously on Monday, as Opec trimmed its demand forecasts for its own oil and hinted that production levels of U.S. crude might not level off until year's end.
In its monthly report released on Monday, Opec forecast that global demand for its crude oil will decrease to 29.19 million barrels per day – down slightly from its previous estimates by 100,000 barrels. Similarly, Opec's forecast only accounted for modest increases in global oil demands revising previous estimates upward by an average of 1.17 million barrels per day to 92.37.
On the Intercontinental Exchange (ICE), brent crude oil for April deliveries plunged 2.36% or 1.29 to 53.38 a barrel. Prices rebounded in U.S. afternoon trading hours after reaching a daily low of 52.65 hours earlier.
On the New York Mercantile Exchange, meanwhile, April deliveries of WTI crude oil plummeted 2.23% or 1.00 to 43.84 a barrel. WTI crude futures dipped below $43 a barrel in early trading to reach a six-year low of $42.85. When adjusted for inflation to 2009 levels, prices were valued at roughly $3 lower.
Since the start of 2009, crude oil futures are down by more than 6%. By comparison, a broad measure of U.S. equity markets indicates that stocks are up roughly 200% during that period.
Last week, oil futures dropped 9.61% or nearly $4.80 a barrel as prices closed down for the fourth consecutive week. The weekly decline marked the biggest drop since early-December.
Oil futures closed down sharply last week, after the International Energy Agency painted a bleak short-term outlook on crude. In the U.S., the IEA said output would slow, but production levels would not fall for the near future. At the same time, inventories for U.S. crude oil reached a record-level of 448.9 million barrels – the most in more than 80 million years. As storage at places such as the Cushing Oil Hub in Oklahoma nears capacity, concerns have mounted that crude futures could drop even further.
Opec, meanwhile, has blamed U.S. production of shale or tight oil for the sharp declines. In its report, Opec noted that production of tight oil might not be curbed until year's end.
"Tight crude producers are aware that typical oil wells in shale plays, decline 60 percent annually, and that losses can only be recouped by drilling new wells," Opec said in its report. "As drilling subsides due to high costs and a potentially sustained low oil price, a drop in production can be expected to follow, possibly by late 2015."