Oil prices take another tumble

The return of high-grade Libyan oil to the market has caused a sharp slide in the price of crude.

Oil hit the skids again this week, with the benchmark future, Brent crude, falling below $95 a barrel. This is the lowest price since mid-2012. Oil has now fallen by almost a fifth since its 2014 peak of $115 in June. It has spent most of the time since the Arab Spring in 2011 in a range between $100 and $120.

What the commentators said

The latest slide, notes Andrew Critchlow in The Daily Telegraph, is due to the return of high-grade Libyan oil to the market; production had previously been hampered by the civil war.

The Hong Kong crisis has reinforced worries about subdued demand growth in China, and the dollar's rally is also having an impact. Commodities are priced in dollars and a higher dollar makes oil more expensive in other currencies, which reduces demand.

The basic pattern in the past few months has been tepid demand growth as the European and Chinese economies have slowed. The fighting in Iraq has not disrupted Middle Eastern production and exports, while tapping shale has led to a glut in the US. Stockpiles are close to record levels.

Meanwhile investors reckon that sanctions will weaken the Russian economy, further tempering demand.

Weaker oil is excellent news for the world economy, said Allister Heath in The Daily Telegraph. Even taking into account the "extraordinary improvements in efficiency" that mean every unit of GDP consumes far less oil than it did in the 1970s or 1980s, high oil prices "undoubtedly aggravated" the downturn and lacklustre recovery in British and global growth. They jumped to $125 in 2011, up from $60 in 2009.

If prices fall much further, key Opec producer Saudi Arabia is likely to cut production to tighten the market, said Liam Denning in The Wall Street Journal. It can no longer balance its books if oil falls below a yearly average of $89 a barrel.

Recommended

Oil had a terrible 2020. This year will be better
Oil

Oil had a terrible 2020. This year will be better

Oil companies are struggling – both BP and Exxon have reported losses after a year in which the oil price briefly went negative. But hang on to your e…
3 Feb 2021
Nuclear power might never be popular – but now looks a good time to invest
Commodities

Nuclear power might never be popular – but now looks a good time to invest

Nuclear power gets a very bad press, but it is the ultimate renewable energy source. Interest in it is perking up again, says John Stepek. Which means…
9 Apr 2021
Does nuclear power have a future?
Energy

Does nuclear power have a future?

Fears about safety have long hobbled the industry, particularly in the wake of Fukushima ten years ago. But the fears are overplayed and net-zero carb…
3 Apr 2021
How to profit as uranium prices head for a melt-up
Industrial metals

How to profit as uranium prices head for a melt-up

The supply squeeze in the uranium market implies ample scope for price rises. Here's how to invest in uranium.
29 Mar 2021

Most Popular

The bitcoin bubble will burst: here’s how to play it
Bitcoin

The bitcoin bubble will burst: here’s how to play it

The cryptocurrency’s price has soared far beyond its fundamentals, says Matthew Partridge. Here, he looks at how to short bitcoin.
12 Apr 2021
Four investment trusts for income investors to buy now
Investment trusts

Four investment trusts for income investors to buy now

Some high-yielding listed lending funds have come through the crisis with flying colours. David Stevenson picks four of the best.
12 Apr 2021
Central banks are rushing to build digital currencies. What are they, and what do they mean for you?
Bitcoin

Central banks are rushing to build digital currencies. What are they, and what do they mean for you?

As bitcoin continues to soar in value, many of the world’s central banks are looking to emulate it by issuing their own digital currencies. But centra…
8 Apr 2021