FROM THE WASHINGTON POST ARTICLE BY CHRIS MOONEY PUBLISHED 12 Dec 2014
The basic reason oil keeps getting cheaper and cheaper
It may well take some time for supply and demand to respond to the price rout…
Extracts
Oil prices continued their slump even lower today, with West Texas Intermediate crude — a U.S. benchmark — now well below $60 per barrel. This is part of a momentous decline of over $40 per barrel since late June.
One catalyst today is the International Energy Agency’s release of its latest Oil Market Report, which lowered the agency’s forecast for global oil demand growth in 2015 by 230,000 barrels per day.
The report could not be more plain that the fundamental cause of the sharp oil price decline — whose knock-on effects include markedly lower gas prices in the U.S., and soon, perhaps, lower airfares — is an imbalance between supply and demand.
And according to IEA, there may be no letup any time soon to the downward economic pressures on oil prices. “It may well take some time for supply and demand to respond to the price rout,” writes the agency.
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