Oil prices hit new lows Wednesday, falling 4.6 percent after U.S. government data exhibited a 10th straight week in crude builds. Traders, however, remain cautious due to the possibility of some volatility ahead of this week's Organization of the Petroleum Exporting Countries (OPEC) meeting, which is set to discuss probable production cuts, according to Reuters.
Crude oil prices have dipped significantly as well, finally breaking through the $40-per-barrel barrier in the wake of the Fed's Beige Book release. Prices were already showing signs of dropping at 7:00 a.m. on Wednesday, trading at $41.68 per barrel, which is down 17 cents from its last settlement and down more than 10 percent since the start of November. Ultimately, crude oil settled at $39.94 a barrel.
The significant dip in prices is due to an unexpected increase in American crude oil production, according to traders. Contrary to analysts' expectations that production would show a decrease of 471,000 barrels, U.S. crude stocks showed an increase of 1.6 million barrels, reported First Post.
The increase is expected to add to the ongoing oversupply in oil that is prevalent in markets worldwide. Currently, about 0.5 to 2 million barrels of oil per day are being produced in excess of demand, which, in turn, led to a price drop of more than 60 percent since June 2014.
Despite the OPEC meeting in Vienna being set for this Friday, analysts expect that the status quo will not change. Rather, it is expected that the members will still insist on keeping up with the current pace of oil production in order to defend its market share from non-OPEC producers like Russia.
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