Oil is rebounding today after a fall that wiped out around 28% of the value of West Texas Intermediate crude over the past six weeks. On Monday, WTI crude fell 8%.
Morningstar senior equity analyst Dave Meats said that the latest oil price declines came after OPEC reported overall production growth of 127 million barrels per day in October, noting that the supply shortage fears that drove up crude prices earlier this year now look overblown.
"In fact, key OPEC producers are now contemplating the need for further production cuts next year to avoid a glut forming instead," Meats said in an analyst note, cautioning that further volatility is likely, as OPEC's remaining spare capacity is unknown, and it's possible that steep declines are still on the way for Iran and Venezuela -- not to mention Angola, Libya and Nigeria.
