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Friday, 7 November 2014

Oil prices fall after OPEC cuts demand forecast

Oil prices fell Thursday after OPEC, supplier of a third of the world's crude, cut its longer-term production forecasts in the face of rising North American shale output.

The benchmark US futures contract, West Texas Intermediate for December, closed at $77.91 a barrel, down 77 cents from Wednesday.

Brent North Sea crude for delivery in December dipped nine cents to settle at $82.86 a barrel in London.

The Organization of the Petroleum Exporting Countries, estimated in its annual world outlook that global demand for OPEC crude oil will fall from just above 30 million barrels per day in 2013 to 28.2 million barrels a day in 2017, before starting to rise again in 2018.

OPEC highlighted that the United States and Canada are the primary drivers of non-OPEC output growth, in part due to shale-oil production.

For Carl Larry, director of oil and gas at Frost & Sullivan, the latest OPEC report shows "there is more concern about what is happening in the US."

The dollar, meanwhile, firmed against the euro after European Central Bank chief Mario Draghi said it was readying further monetary stimulus measures if needed to counter the threat of deflation in the ailing 18-nation eurozone.

"Crude oil (traded) lower on the combination of Draghi talking the dollar up and OPEC cutting the forecast for the amount of crude oil it will need to supply due to rising shale oil production," said Saxo Bank analyst Ole Hansen.

The stronger greenback makes dollar-priced commodities more expensive for buyers using weaker currencies, which in turn tends to hit demand and prices.

Hansen pointed out that OPEC's 2017 production estimate of 28.2 million barrels a day would be a 14-year low.

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