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Brent oil price falls below $59 a barrel | Brent oil price falls below $59 a barrel |
(about 4 hours later) | |
The price of Brent crude oil has fallen below $59 a barrel for the first time since May 2009. | The price of Brent crude oil has fallen below $59 a barrel for the first time since May 2009. |
After dropping below $60, the Brent price then fell to $58.50 a barrel, before recovering slightly to $59.01. | |
Oil prices have now nearly halved since June as a result of waning demand and increased supplies. | Oil prices have now nearly halved since June as a result of waning demand and increased supplies. |
The latest fall was triggered by news of a fall in industrial activity in China, the world's second largest consumer of oil. | The latest fall was triggered by news of a fall in industrial activity in China, the world's second largest consumer of oil. |
The price of US crude fell by $1.86 to $54.05 a barrel. | |
The drop came as members of oil cartel Opec reiterated that they would not try to shore up plunging oil prices by reducing production. | |
"We need to watch the market closely, but it will settle eventually," Qatar's oil minister, Mohammed al-Sada, said. | |
Russian energy minister Alexander Novak had the same message. | |
"If we cut, the importer countries will increase their production and this will mean a loss of our niche market," he said. | |
The comments came a couple of days after the world energy watchdog, the International Energy Agency, cut its oil demand forecast for 2015. | |
Meanwhile, credit ratings agency Standard & Poor's lowered its oil price assumptions to $70 a barrel for Brent in 2015 and $75 a barrel in 2016. | |
It blamed "relatively unconstrained supply and weaker demand" for the downgraded forecast. | |
Rouble rout | Rouble rout |
While lower oil prices could provide a boost to many economies through cheaper fuel, the sharp drop in the cost of crude is affecting many oil producers. | While lower oil prices could provide a boost to many economies through cheaper fuel, the sharp drop in the cost of crude is affecting many oil producers. |
On Tuesday, Russia dramatically increased its interest rate from 10.5% to 17% in an attempt to halt the slide in the country's currency, the rouble. | On Tuesday, Russia dramatically increased its interest rate from 10.5% to 17% in an attempt to halt the slide in the country's currency, the rouble. |
The rouble has lost 50% against the US dollar this year as falling oil prices and Western sanctions continue to weigh on the country's economy. | The rouble has lost 50% against the US dollar this year as falling oil prices and Western sanctions continue to weigh on the country's economy. |
However, early signs were that the attempt to defend the currency had failed, with the rouble hitting fresh lows against the dollar. | However, early signs were that the attempt to defend the currency had failed, with the rouble hitting fresh lows against the dollar. |
Investment hit? | Investment hit? |
With high levels of output from the US and no sign of a sustained economic recovery in Europe, most experts believe prices will remain low for the foreseeable future. | With high levels of output from the US and no sign of a sustained economic recovery in Europe, most experts believe prices will remain low for the foreseeable future. |
However, the low cost of crude may also make investment in some new wells uneconomical - which means prices could rise in the longer term. | However, the low cost of crude may also make investment in some new wells uneconomical - which means prices could rise in the longer term. |
Goldman Sachs has estimated that about $930m of investment in new oil projects could be hit, given the recent plunge in oil prices. | Goldman Sachs has estimated that about $930m of investment in new oil projects could be hit, given the recent plunge in oil prices. |
Without this investment, new oil output could be cut by about 7.5 million barrels a day by 2025, or about 8% of current demand, the bank estimates. | Without this investment, new oil output could be cut by about 7.5 million barrels a day by 2025, or about 8% of current demand, the bank estimates. |