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Low demand fuels oversupply of oil

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Bob Moon: OPEC is getting anxious about oil prices. A barrel of crude is still below $50. And Iran’s oil minister complained today that countries are stockpiling more oil.

But the biggest reason for declining prices is weak demand. People aren’t driving as much as they used to. Industry isn’t using as much fuel. And that’s causing an oversupply. And yes, that leads to stockpiling. As Tamara Keith reports, crude inventories here in the U.S. are at their highest levels now since 1990.

TAMARA KEITH: Oil inventories include all the crude sitting in pipelines and storage tanks just waiting to be refined. And there’s a lot of it sitting around right now.

RON PLANTING: It’s a symptom of our current economic recession.

Ron Planting is an economist at the American Petroleum Institute. He says as weak demand pushes down prices some companies are stocking up on what appears to be bargain oil.

PLANTING: That’s what it looks like to me, that there’s a lot of crude oil on the world market and some companies think it’s a good time to buy it and hold it for later.

The Organization of the Petroleum Exporting Countries, OPEC, has cut its output to try and deal with the oversupply. But Gene McGillian, an analyst with Tradition Energy, says the cuts haven’t had their intended effect yet.

GENE MCGILLIAN: They have begun to start to work their way, it’s just that the drop in consumer demand has kind of out paced that.

And while oil producers may see excess inventory as a problem for consumers, it can mean less pain at the pump.

In Washington, I’m Tamara Keith for Marketplace.

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