Oil falls under $60 a barrel as glut grows
OIL prices fell below $60 per barrel for the first time in more than a year yesterday, marking a loss of nearly 30pc since early October this year. Brent crude plunged $3.80 to settle down 6pc at $58.80.
An expected supply crunch has become a glut thanks to fears of a global economic slowdown and after US president Donald Trump granted waivers to key importers on US sanctions against Iran. The trade war between the US and China has also shaken global business confidence.
Analysts believe the Opec nations may soon strike a private agreement to cut production levels in order to stem the slump.
The decision will be partly informed by the outcome of Us-china discussions at next week’s G20 summit.
Shares in major US oil companies Exxon Mobil and Chevron lost more than 2pc in early trading, following the oil price drop. Bob Minter, of Aberdeen Standard Investment. said that removing production bottlenecks in the US had had a significant impact on supply levels.
This also follows the World Bank’s October commodities markets outlook, which said that US oil production would be robust next year.
Despite higher production, the World Bank said that it expected oil prices to average $74 a barrel in 2019, $2 higher than its 2018 forecast. However, Caroline Bain, of Capital Economics, said that her forecast of oil prices at close to $60 per barrel in 2019 remained in place.
Yesterday’s slump was a product of recent volatility, and wider economic trends supported a figure of close to $60, Ms Bain added.
The waivers on US sanctions on Iran for major oil importers such as India had shocked the market, Ms Bain said.