The stock markets in the United States fell as investors’ selloff in energy companies continued after the Organization of Petroleum Exporting Countries (OPEC) reduced its forecast for crude demand on 2015.
The OPEC cut its forecast by 300,000 barrels to 28.9 million barrels per day. Saudi Arabia, Iraq and Kuwait—the three largest members of the organization have been selling oil to Asian buyers over the past six years, according to Bloomberg.
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The price of crude suffered a new decline today after Kuwait offered new discounts to Asian Customers and Saudi Arabia’s Energy Minister Ali Al-Naimi questioned the need for a production cut.
In response to the question of reporters regarding the issue, Al-Naimi said, “Why should I cut production? This is a market and I’m selling in a market. Why should I cut?”
Brent Crude declined as much as 4.9% to $63.56 a barrel on the ICE Futures Europe Exchange in London. Yesterday, Iran’s Oil Minister Mohammad Sadegh Memarian warned about the possibility that the price of crude could drop to as low as $40 a barrel if the solidarity of the OPEC breaks down.
Abhishek Deshpande, an analyst at Natixis SA in London told Bloomberg,“Saudi’s paradigm shift clearly shows their frustration with increasing supplies globally, OPEC and non-OPEC both. Saudi is testing the water here with unconventional non-OPEC producers.”
Commenting on the movement of the stock markets, Michael James, managing director of equity trading at Wedbush Securities said, “Oil is lower on the reduced demand outlook and it’s not a surprise to see the rest of the market, at least in sympathy, going down on that. Without any news to prompt the market to move higher today, it puts the onus back on the bulls to see how much conviction they have in buying stocks.
- Dow Jones Industrial Average (DJIA) – 17,533.15 (-1.51%)
- S&P 500- 2,026.15 (-1.63%)
- NASDAQ- 4,684.03 (-1.73%)
- Russell 2000- 1,162.16 (+2.18%)
- EURO STOXX 50 Price EUR- 3,150.95 (-0.37%)
- FTSE 100 Index- 6,500.04 (-0.45%)
- Deutsche Borse AG German Stock Index DAX- 9,799.73 (+0.06%)
- Nikkei 225- 17,412.58 (-2.25%)
- Hong Kong Hang Seng Index- 24,524.52 (+0.16%)
- Shanghai Shenzhen CSI 300 Index- 3,221.55 (+3.69%)
Stocks in Focus
The stock price of Yum! Brands, Inc. (NYSE:YUM), the parent company of KFC and Taco Bell declined more than 6% to $70.53 after providing a weaker earnings outlook for 2015. The company estimated that EPS will grow in the “mid-single-digit” percentage compared with its previous growth forecast of 20%.
JPMorgan Chase & Co. (NYSE:JPM) declined nearly 3% to $60.68 per share after its CFO Marianne Lake stated that the bank will probably suffer from a “high-teens” percentage drop in trading revenue for the fourth-quarter.
The shares of Denbury Resources Inc. (NYSE:DNR) fell more than 6% to $6.55 per share. The company announced that it entered a new five-year revolving credit facility, which amends and restates its prior facility set to mature in May 2016.