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The price of November US light crude oil fell sharply today, dropping more than 1% to complete its fourth losing week in the last five.
Crude oil has been supported since the late summer by geopolitical issues, with tensions in Egypt and Syria causing traders to price in a premium for the risk that the instability posed to Middle Eastern supplies.
That helped to disguise the fundamentally bearish picture of the shale boom in the US. With tensions having eased since in the Middle East, the commodity is now being pressured both by the potential impact on fuel demand posed by the US government shutdown and the prospect of oil production expanding next year in the US.
‘With output of more than 10 million barrels per day for the last two quarters, its highest in decades, the nation is set to become the largest non‐OPEC liquids producer by the second quarter of 2014, overtaking Russia,’ the Paris-based IEA said today.
US oil output has spiked in the last couple of years on account of new techniques, such as horizontal drilling and fracking, that allow access to previously untapped subterranean reservoirs trapped in shale rock formations in the Midwest.
The IEA sees the increase in US production leading total non‐OPEC supplies to rise by an average of 1.7 million barrels per day next year, which would be the fastest rate of growth since the 1970s.
The IEA also slightly lowered its 2014 forecast for worldwide oil demand growth in 2014.