The price of oil continues to slide amid signs of weaker demand from slower global growth and an oversupply of oil in the market with U.S. shale drillers adding more oil to already high oil barrel levels that are found in the global market.
The price of international benchmark Brent crude fell today over 1.93 percent to $54.81, moving below a 5 1/2 year low.
Uncertainty over the price of oil has weighed down on markets and forced selling pressure on shares of energy companies.
Last week the International Energy Agency released the oil market report for December and said that 2015 global oil demand will grow by 900,000 barrels a day (mb/d) which is 230,000 less than previously forecast to 93.3 million compared to 92.4 in 2014.
Today the price of oil moved lower after a manufactory report from China showed industrial activity contracted for the first time in 7 months and weaker housing starts data in the U.S. were also reported for November.
Chinese factory output growth declined to 7.2 percent in November from 7.7 percent growth in October.
China’s GDP growth rate remains the slowest in 5 years and is expected to be 7.1 percent in 2015 from 7.5 percent this year.
Meanwhile, growth in the 18 member Euro area currency area remains lackluster.
GDP growth advanced 0.2 percent in the third quarter of 2014, up from a 0.1 percent in the second quarter.
Some of the higher GDP growth occurred due to changes in the GDP calculating methods introduced by the Eurostat.
Low inflation remains a concern in the Euro area which had 0.30 percent inflation in November 2014, down from 0.4 percent in October and well below the ECB’s target of just below 2 percent.
Falling oil prices have helped to lower inflation in the U.S. during a period of time when the U.S. Federal Reserve is closely watching U.S. inflation levels to determine whether 2015 is the right time begin hiking short term interest rates.
Tomorrow the Federal Reserve will meet in Washington for their final 2014 FOMC meeting.
Economists expect Fed Chair Yellen to speak about falling oil prices being a boon to the U.S. economy even as weaker oil prices sends inflation further away from the Fed’s 2 percent target and weaken other economies such as Russia’s, causing a negative trading impact with the economies in Europe that depend on selling products to Russians.
Russia’s central bank has responded to the plunge in Russia’s currency by raising its key interest rate from 10.5 percent to 17 percent as the Russian economy plans to enter a recession in 2015 mostly due to collapsing oil along with some international sanctions.