Oil price falls to 11- year low

THE oil price hit an 11- year low yesterday amid fears of a worsening glut next year as fresh supplies hit the market.

Brent crude fell nearly 2 per cent to just above $ 36- a- barrel – even lower than during the fi nancial crisis and its cheapest since July 2004.

The benchmark price has plummeted 37 per cent in 2015 as producers keep pumping to maintain their market share despite waning demand from emerging economies such as China.

With global production running close to record highs, the prospect of more barrels from Iran as sanctions are lifted and growing stockpiles in America as more rigs are put into operation is set to keep prices depressed.

The International Energy Agency has predicted that growth in demand will fail to match additional global oil supply until late next year at the earliest.

This followed a decision by the Saudiled Opec cartel of producing countries to scrap its official production ceiling to defend its market share against nonOpec supply including US shale drillers.

Russian production has been stepped up, while the number of rigs deployed in the US rose for the first time in five weeks last week by 17 to 541, according to oilfield services fi rm Baker Hughes.

Saxo Bank senior manager Ole Hansen said: “Really, I wouldn’t like to be in the shoes of an oil exporter getting into 2016. It’s not exactly looking as if there is light at the end of the tunnel any time soon.

“For every dollar we move lower that brings forward increased stress in the system.”

The slide in oil prices has prompted some investors to call into question Shell’s prop os e d £4 7 b i l l i o n takeover of fellow FTSE 100 company BG Group announced last April.

The companies said yesterday that shareholders are expected to vote on 27 and 28 January – the final obstacle to a combination creating the world’s most powerful liquefi ed natural gas trader. The deal cleared its last regulatory hurdle last week when China’s ministry of commerce gave its approval.

Standard Life Investments’ head of equities David Cumming said it would be “very diffi cult to make the deal work” with oil at under $ 40- a- barrel.