Oil prices hit six-year low

Photo courtesy: The Daily Advertiser

Oil prices hit a six-year low Tuesday, reacting to the devaluation of the Chinese yuan and a report of higher Iranian oil production.

West Texas Intermediate, the benchmark U.S. crude, for September delivery closed at $43.08 per barrel on the New York Mercantile Exchange, down $1.88, the lowest since 2009.

At the same time, the U.S. Energy Information Administration issued a prediction for lower oil prices for the year.

It says U.S. benchmark crude will average $49.62 a barrel this year, reducing its projection from last month of $55.51 a barrel, Bloomberg News says. The report also estimates that Brent crude, the European benchmark crude, will average $54.40, down from a previous prediction of $60.22.

Falling oil prices reflect a changing world situation in which the Chinese economy is slowing, creating less demand for oil and other raw materials.

China “has been the sputtering engine that has caused the commodity selloff this spring and summer,” says Tom Kloza, global head of energy analysis for the Oil Price Information Service. Oil prices are “going to remain challenged.” All producers can hope is “maybe a black swan somewhere will cut production.”

At the same time, the Organization of Petroleum Exporting Countries has raised its output. The Associated Press says it has has hit 31.5 million barrels last month, up 100,700 barrels a day.

Much of the increase was due to Iran. It boosted production by 32,300 barrels a day in July to 2.86 million a day, highest since June 2012, according to data OPEC compiles from “secondary sources.”

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