...and all the while, page-5

How low can oil go? Strategists warn Brent could tumble further

21 Oct 2014 | 12:12
Alice Rigby

• Send
• Print
• Share
• Comment
• Send to Kindle

The sharp slides in oil prices seen since the summer could continue unabated until the commodity’s chief trade body OPEC (Organization of the Petroleum Exporting Countries) is finally forced to take action, investors have said.
The last quarter has seen oil prices tumble, with Brent crude falling from $113.6 per barrel at its peak in July, to less than $80 last week.
The dive was exacerbated by an acceleration in production of alternative energy, including shale in the US, which forced the International Energy Agency to cut oil demand forecasts earlier this month. Global growth worries and the slowdown in China have also had an impact on prices.
The fall of 30% in the price of crude has left it at its lowest level since 2010, but investors said there is still plenty more risk to the downside.
John Ventre, head of multi-asset at Old Mutual Global Investors, said oil could continue to fall until there is proper intervention from OPEC, with parts of the global supply now coming from unstable regions which are less concerned about the price they charge per barrel.
“Normally, as prices fall, less oil is sold, stabilising the market. What is different this time is that Iraq, Syria, and Libya do not have stable governments, and the US-Iranian deténte has resulted in Persian oil coming back online,” he said.
“The effect is that a lot of supply has become inelastic to prices – oil is being sold whatever the price. Meanwhile, OPEC has been reluctant to cut production for fear of losing market share, although it seems likely it will be forced to act soon, and then prices should begin to stabilise.”