U.S. stocks Wednesday extended losses for a second day of volatile trading as the Organization of the Petroleum Exporting Countries (OPEC) slashed its estimate of 2015 crude oil demand. OPEC reduced its estimate of next year's production to 28.9 million barrels a day, or roughly 300,000 fewer barrels than previously forecast, due to the uncertainty of demand after global oil prices plunged 40 percent since June.
Equities have been volatile the last two days. On Tuesday, the Dow Jones Industrial Average tumbled over 200 points in early trading as oil prices continued to hover around five-year lows after U.S. crude dipped to less than $63 a barrel on Monday for the first time since July 2009.
On Wednesday U.S. stocks extended losses after fresh data showed U.S. commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve, unexpectedly rose by 1.5 million barrels during the week ended Dec. 5 from the previous week, the U.S. Energy Information Administration said in its weekly oil inventories report Wednesday. That compares with last week's report that showed U.S. crude inventories dropped by 3.7 million barrels from the previous week. Crude inventories are one of the most widely used indicators by oil traders to measure current stock levels, or the amount of oil currently stored for future use.
“The experts seem to be looking for a contraction in supply for the second straight week, but this number is very difficult to predict,” Stephen Guilfoyle, chief economist at Sarge986.com, said in a note.
Following the report, global benchmark Brent crude dropped 2.15 percent on Wednesday to $65.40 a barrel on the London ICE Futures Exchange. Meanwhile, West Texas Intermediate crude (WTI), the benchmark for U.S. oil prices, declined 2.66 percent to $62.12 for January delivery on the New York Mercantile Exchange.
“Commodity exporters have been struggling to cope with a downturn in global commodity demand for some time, but the latest price falls have made their underperformance compared with net commodity importers even more stark. Given that oil prices have continued to fall since October, this divergence has probably widened further,” Neil Shearing, chief emerging markets economist for Capital Economics, said in a research note Wednesday.
The U.S Department of Treasury will release its monthly budget statement for October at 2 p.m. EST following the previous month’s budget that showed the U.S. government had a deficit of $483 billion in 2014.
In late morning trading, the Dow Jones Industrial Average, which measures the share prices of 30 large industrial companies, dropped over 150 points, or 0.66 percent, at 17,641.55; the S&P 500 Index lost 11.60 points, or 0.58 percent, at 2,047.62. The Nasdaq Composite declined 14.80 points, or 0.31 percent, to 4,751.75.