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Oil prices tumble by a third as global demand slows

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General view of the Petrolchemie und Kraftstoffe (PCK) oil refinary in Schwedt/Oder, October 20, 2014. There is no need to panic at the recent collapse in oil prices, the secretary general of OPEC said October 29, 2014, saying low prices would curb competing supplies and require the group to pump far more by the end of the decade

General view of the Petrolchemie und Kraftstoffe (PCK) oil refinary in Schwedt/Oder, October 20, 2014. There is no need to panic at the recent collapse in oil prices, the secretary general of OPEC said October 29, 2014, saying low prices would curb competing supplies and require the group to pump far more by the end of the decade

REUTERS

General view of the Petrolchemie und Kraftstoffe (PCK) oil refinary in Schwedt/Oder, October 20, 2014. There is no need to panic at the recent collapse in oil prices, the secretary general of OPEC said October 29, 2014, saying low prices would curb competing supplies and require the group to pump far more by the end of the decade

General view of the Petrolchemie und Kraftstoffe (PCK) oil refinary in Schwedt/Oder, October 20, 2014. There is no need to panic at the recent collapse in oil prices, the secretary general of OPEC said October 29, 2014, saying low prices would curb competing supplies and require the group to pump far more by the end of the decade

REUTERS

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General view of the Petrolchemie und Kraftstoffe (PCK) oil refinary in Schwedt/Oder, October 20, 2014. There is no need to panic at the recent collapse in oil prices, the secretary general of OPEC said October 29, 2014, saying low prices would curb competing supplies and require the group to pump far more by the end of the decade

Oil prices have tumbled by a third since the summer as global demand eases in the face of a slowdown in the economic recovery.

They fell again this week, with Brent crude dipping to a four-year low of 82 US dollars a barrel after leading producer Saudi Arabia cut the price of oil sold to the United States.

In June, the price had reached nearly 116 US dollars as the advance of Islamic State sparked fears over supplies from Iraq.

But gathering gloom over growth - with the eurozone stagnant and Chinese expansion easing - has raised fears of a glut of oil swilling around the world economy.

Brent crude slipped below the 100 US dollar mark in September and has continued to head lower - helpful for petrol-guzzling consumer economies but costly for many oil-producing nations and large oil firms.

The slide is likely to produce demands for action at the next meeting of the Organisation of the Petroleum Exporting Countries (OPEC) on November 27.

But some of the smaller members of the cartel are likely to have been caught on the hop by dominant Saudi Arabia's unilateral move to cut prices to the US.

The move is seen as an attempt by the kingdom - which is big enough to withstand lower prices - to remain competitive with shale oil.

It will also tighten the squeeze on its smaller rivals Iran and Russia, which are more dependent on higher prices, resulting in increased tensions at this month's meeting.

Others such as Venezuela and Russia will also be hurt.

Closer to home, UK-based oil giants BP and Royal Dutch Shell have acknowledged the impact on their business, causing them to tighten the purse strings rather than pursue some costly spending projects.

BP last week reported a fall in quarterly profits and said it had to maintain a "strictly disciplined approach to investment".

Shell saw a sharp rise in third quarter profits but chief executive Ben van Beurden said the "volatility" in prices underlined the need to keep a tight hold on costs and spending as it focused on slimmed-down future plans.

PA Media