N Sea crude oil falls below $40 a barrel for the first time since 2009

Oil $40 barrel imageContinuing market reaction to last Friday’s decision by the Arab dominated OPEC cartel to maintain current production rippled across global markets today (8 Dec 2015).

See also Scottish Energy News 7 Dec 2015:

‘Brent crude oil could sink below $40-barrel’ –

http://www.scottishenergynews.com/n-sea-oil-price-falls-again-after-opec-decides-to-keep-pumping-to-drive-out-us-shale-producers/ 

The price of a barrel of benchmark Brent crude oil from the N. Sea dropped below $40-barrel – its lowest since 2009 – before creeping back over the psychological ‘price-point’.

Michael Hewson, chief market analyst at CMC Markets, said: “OPEC has lost control of the oil market and – unless something fundamental changes that causes demand to overtake the oversupply in the market – the path of least resistance is the 2008 lows of $35-$38-barrel.”

And Doug King, chief investment officer in London for the Singapore-based Merchant Commodity Fund, said: “What matters from here is whether there’ll be any meaningful production cuts in the US – which don’t seem to be coming.”

Banks such as Goldman Sachs have warned that oil could fall to as low as $20-barrel as the world might run out of storage to place unwanted crude.

World oil stockpiles are at a record, according to the International Energy Agency.

OPEC has all but abandoned price support for crude through production-cutting the group once resorted to. It has also failed for the first time in decades to agree to a production ceiling.

Instead, its core members, led by top crude exporter Saudi Arabia, appear to be readying for new battles for share in a market already heavily oversupplied and consuming almost two million barrels per day less than it is producing.

David Hunter, an energy industry analyst with Schneider Electric, said: The biggest factor for the future path of fuel prices remains the crude oil price. If it continues to fall, and sterling holds its value against the dollar, then further reductions at the pumps are possible. 

“Plummeting fuel costs are putting some serious money in the pockets of consumers and businesses. Not just through lower energy bills, but thanks to reduced indirect costs from the likes of logistics and manufacturing.

“Investing these savings in energy efficiency measures at the household or business level will protect consumers from future price volatility when markets inevitably recover.

“A falling oil price, amid dramatic supply shifts from east to west, has set the stage for a transformation of our energy dependencies, and a push for a cleaner solution. There’s a huge opportunity for governments that subsidise fossil fuels to reduce or remove subsidies while prices are lower.

“This in turn frees up budgets (both domestic and industrial) for investment in energy efficient technology. Governments, and the energy industry as a whole, need to take this opportunity to make hay while the sun shines.”

Pixie Energy

Pixie logo Pixie Energy is an incubator and a facilitator of strategic research and project work, focusing on energy regulation, policy and markets at the local and national level. Find out more about Pixie Energy here.

Local Energy Matters: Scotland

Local Energy Matters: Scotland is a free-to-download brochure with a focus on energy tariffs in the two Scottish electricity distribution regions, as well news on local energy and low-carbon schemes.

Previous editions can be download here.

Scottish energy market overview

You can read an overview of the Scottish energy market here.

Scottish Government energy feed