Oil settles at $44 as OPEC predicts U.S. output growth will slow

North American oil contracts fell below $44 US on Monday after new predictions about economic turmoil in China and an OPEC report showing low prices are slowing production in North America.

The West Texas Intermediate contract settled at $44US a barrel at the end of the day, down 63 cents, after spending most of the day in the $43.50 range.That's above the six-year low of $39.31 it hit on Aug. 25, but well below the $60 level producers had hoped for in the second half of the year.

• Goldman Sachs downgrades oil forecast, says $20 per barrel is possible

Brent oil, the main international contract traded in London, fell more than 3.4 per cent to $46.50.

Markets in Toronto and New York also continued downward, with the TSX falling 87 points to 13,373 and the Dow losing 83 points to 16,349.

Investors are wavering on stocks ahead of the Federal Reserve decision Thursday on interest rates.

OPEC report

The Organization of Petroleum Exporting Countries issued its monthly report on the oil market Monday, predicting non-OPEC output would slump by 110,000 barrels a day by 2016.

The International Energy Agency forecast an even steeper plunge, of 500,000 barrels a day by 2016, in its report issued Friday.

As it becomes clear the OPEC countries are not going to cut production to ease the worldwide oversupply of oil, U.S. shale producers have begun to scale back.

WTI's fall below $50 is believed to be a result of Saudi Arabia's strategy to keep its market share by driving out more-expensive producers.

"There are signs that U.S. production has started to respond to reduced investment and activity," OPEC said in the report. "Indeed, all eyes are on how quickly U.S. production falls."

Canada to pump4.4 million barrels a day

OPEC predicts supplies from non-OPEC nations such as the U.S., Canada, Russia and Brazil will increase to 57.6 million in 2016, a modest 160,000 barrels a day increase.

It forecasts Canadian production will average 4.4 million barrels a day in 2015, revisingthat estimate upslightly by 90,000 barrels because of new oilsands production that has come online.

The other factor that is driving prices lower is fresh doubt about demand from China and other emerging nations.

China's factory output grew by 6.1 per cent in August, a disappointing number that cast doubt on the strength of its industrial activity.

Most commodities, including gold, copper and palladium, were down on the news.

The Bank of International Settlements issued a report Sunday that pointed to growing vulnerabilities in emerging market economies, including China.

While China's slowdown means demand for natural resources is down, many other emerging economies are dependent on the Chinese market to sell their commodities.