Why Brent crude oil price fell below $50 a barrel

Written by | January 7, 2015 | 0

New Delhi: Brent crude oil prices fell below $50 a barrel for the first time since May 2009 on Wednesday as global business growth slowed to its weakest in a year, and analysts said a growing supply glut meant more falls were likely .

We take a look at the factors which led to the fall in brent crude oil prices.

1. On Tuesday, Saudi Arabia’s King Abdullah said in a speech read for him that the country would deal with the challenge posed by lower oil prices “with a firm will,” giving no signs the No. 1 crude exporter will cut supplies.

2. The pace of global business growth eased to its weakest rate in over a year at the end of 2014 as rates of expansion slowed in both the manufacturing and service industries, according to JPMorgan’s Global All-Industry Output Index, produced with Markit.

3. The demand for crude oil has been falling with major consumers such as US and Canada exploring other alternatives of energy such as shale gas to reduce their dependence on the OPEC nations.

4. Some reports say the sell-off in oil began six months ago on concerns of an oversupply of high quality US shale crude. It accelerated after a meeting of the Organization of Petroleum Exporting Countries in November, when Saudi Arabia ruled out production cuts as a means of boosting prices.

5. Many observers expect the price of oil to fall further as North American shale producers continue to supply increasing quantities of oil and gas and Opec resists calls for cuts in production to support prices.

6. The low prices are a result of high output clashing with sluggish demand, especially in Europe, which is still struggling with its debt crisis, and in Asia, where China’s growth is slowing and Japan is battling recession.

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