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Oil hits five-year low on Opec report and US concerns

Tool covered in oil from rig in Oklahoma
Image caption Two separate reports have renewed investor concerns about a growing global oil supply glut

The price of oil has fallen to fresh five-year lows in the wake of two separate reports indicating a global supply glut.

Opec oil producers released a forecast indicating less global oil demand next year.

A separate US report, which showed a surprise increase in the country's crude oil supplies, also pushed prices lower.

The price of Brent crude has fallen 43% since mid-June.

It fell another 3.61% to close at $64.41 on Wednesday.

Further fall?

The influential oil commentator Jorge Montepeque at price assessor Platts said the price could fall further.

"There are a certain amount of people that think the mid-to-long term [price] is the mid-60's," he told the BBC.

"That means prices could fall further before they reach their balance. I think we could see some spikes or troughs that are a little bit deeper. But over time we could end up around $50 or $60 [a barrel]."

Brent Crude Oil Futures $/barrel

Last Updated at 20 Nov 2017, 20:45 GMT *Chart shows local time Brent Crude Oil Future intraday chart
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In its report, Opec said that it expected demand for its crude oil to fall to 28.9m barrels per day next year, which is near ten-year lows.

Opec's official production target is 30m barrels per day, meaning significantly more oil would be on the market than was demanded.

In a separate note, the US Energy Department said there was a surprise increase in US crude stockpiles last week of 1.5m barrels.

Analysts had been predicting a decline of 2.2m barrels.

That increase has led to declining prices for petrol, jet fuel, and heating oil.

Cheaper air fares

The Energy Department says that if its projections hold, the price of petrol in the US will fall by 23% to $2.60 per gallon next year, saving the average US household approximately $550 a year.

The decline in oil prices has hurt the share price of several large firms, from Exxon Mobil to BP, but helped businesses such as airlines where cheap oil prices can help buoy profits.

Shares in US carriers American Airlines and United both ended slightly higher on Wednesday, while oil shares fell sharply.

The airline industry body, IATA, said passengers would see cheaper fares.

"We see prices for tickets coming down by 5.1% next year and cargo rates coming down more than that, probably by 5.8%," Antony Tyler, director-general at IATA told the BBC.

"Airlines' fuel prices are based on the previous month's oil price so airlines are not seeing the results of the falling oil price just yet."

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