Over-supply fears push oil prices to 12-year low
Oil fell below $33 a barrel yesterday for the first time since April 2004 as the slide in Chinese shares rattled investors already concerned by near-record production and massive stockpiles of unwanted crude and refined products.
Oil prices have fallen by about 70pc since mid-2014, hurting oil companies and governments that rely on crude revenue.
Cheap oil has been a boon to energy importing economies including Ireland over that period - cutting the cost of everything from manufacturing to running cars and heating homes.
However, low oil prices are also a significant factor in the dangerously low levels of inflation in the Euro area in particular, which massive efforts by the European Central Bank have failed to budge.
"Negative sentiment is hurting demand expectations, growth is easing in China and there is a spillover from the inventory build in (US) gasoline stocks from yesterday and this is reflected in prices," said Hans van Cleef, senior energy economist at ABN Amro in Amsterdam.
Brent fell more than 5pc in early European trade to a low of $32.16 before trimming some of its losses. It was down 1.6pc at $33.70 by late afternoon.
US crude futures hit a low of $32.10, their lowest since late 2003, before bouncing slightly to $33.32.
Prices trimmed early losses, with violence in the Middle East and north Africa ironically offering a measure of support for the market.
A military training center in the Libyan town of Zliten was hit by a truck bomb yesterday , causing dozens of casualties, witnesses said, while dozens of air strikes hit the Yemeni capital Sanaa.
Some investors think the growing list of violent confrontations across the Middle East will ultimately affect oil supply - which would send prices higher.
Bank of America Merrill Lynch said in a note on Thursday that the risk of a dip below $30 has grown.
Exacerbating the oil market woes is weakening demand, especially in Asia including China, which is seeing its slowest economic growth in a generation.
Large global inventories are also putting pressure on prices. (Reuters)