WTI crude oil prices today (Monday) fell 1.1% as futures struggle to trade above $35 a barrel.
At 9:20 a.m., WTI crude oil prices were trading at $35.24. Earlier this morning around 7:30 a.m., the U.S. benchmark tumbled below $35 for the first time since February 2009. Futures are now down 15.4% this month and 41.2% this year.
Brent crude oil prices fared much worse this morning. The global benchmark fell 2.2% to $37.48 a barrel. It has dropped 17.2% so far in December and 43.8% in 2015.
Here's what's dragging down WTI crude oil prices today...
Two Reasons Why WTI Crude Oil Prices Are Down Today
The first factor behind today's decline is OPEC's adamant decision to increase production at its most recent meeting.
On Dec. 4, oil officials from all 12 OPEC countries met to discuss the abysmal state of the oil market. The summit ended with the cartel deciding to raise its output ceiling from 30 million barrels a day to 31.5 million. The call to boost production surprised energy investors and has sent WTI crude oil prices down 11.8% in less than two weeks.
OPEC's strategy has been to produce as much as possible to protect market share and hurt U.S. and Russian competitors - no matter how low prices go. This month's meeting marked the third time since November 2014 that the cartel decided to maintain its stringent strategy.
But there's another reason why oil prices are falling today. And it has to do with a landmark deal that could have a tremendous effect on the future of oil demand...
The second reason for today's oil price plunge is the climate deal struck at the COP 21 conference in Paris over the weekend.
At the UN-sponsored meeting, 195 countries agreed to limit global warming growth to below 2 degrees Celsius (or 3.6 degrees Fahrenheit) by developing detailed plans to reduce greenhouse gas emissions. It ended a decades-long effort to lower gas emissions responsible for increasing the global temperature.
Many energy companies believe the coordinated strategy will leave them in a mountain of debt as countries rely less on fossil fuels. According to Bloomberg, oil and natural gas companies are projected to spend $1.96 trillion on drilling projects over the next five years.
All of this means energy companies around the world may waste trillions of dollars producing commodities with hardly any demand.
"There is little doubt that the Paris Agreement creates a long-term challenge to the business model of many of Europe's integrated oil companies," Morgan Stanley (NYSE: MS) analysts told MarketWatch this morning. "The world's known reserves are substantial, and some of those resources may need to be 'left in the ground' already."
But according to Money Morning Global Energy Strategist Dr. Kent Moors, oil demand will still be strong in 2016.
In fact, increasing demand is one of several reasons he sees WTI crude oil prices rebounding by Q2 2016...
Alex McGuire is an associate editor for Money Morning who writes about energy. Follow him on Twitter for all the biggest oil and gas updates.
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