Oil prices in New York and London have dipped below $50 a barrel for the first time since May 2005. The cost of crude is slipping as financial markets reflect ever lower confidence in the world economy and evidence mounts of falling fuel demand.
Oil has lost about two-thirds of its value since July’s record above $147 a barrel. The falls in crude prices have mirrored weakness on share markets. Analysts at Deutsche Bank say it could drop to as low as $40 a barrel next year.
In theory,the producers’ group OPEC can provide price support by curbing supplies. Since early September, OPEC has said it will pump around two million barrels per day less, but the market has taken the view that falling demand is a bigger factor than tightening supply.
As the economic slowdown has destroyed fuel demand, oil companies plan to store millions of barrels of oil in tankers, in the hope of an improvement in demand.