Brent crude plunged 6.7 per cent last night after the OPEC oil cartel decided against intervening in the market to quell steady price declines. The cartel agreed to keep their output ceiling at 30 million barrels a day, sending the futures price to a four year low of $71.12.
This is a chart, Shane Oliver tweeted today:
Some of the fall is believed to be attributable to the United States gaining oil independence through local shale oil production. But this production is extremely expensive and could be one of the reasons why the cartel decided to do nothing, hoping to price U.S. shale oil out of the market.
Another cause is thought to be falling global demand for oil, especially from regions such as China and Europe. Two months ago, the International Energy Agency (IEA) said a sudden drop in oil demand for the second quarter of 2014 was “nothing short of remarkable.”
It has some wondering if the fall in oil prices is a leading indicator of falling world demand and the onset of the GEC – The Global Economic Crisis? (Note the 78% decline during the heights of the GFC)
The lack of intervention is said to be an indicator that world oil prices will continue to decline for now.
» Oil price collapses after OPEC nations decide against cutting production – The ABC, 28th November 2014.
» Oil rout threatens to spoil Australia’s gas bonanza – The Age, 28th November 2014.
» Drop in global oil demand ‘nothing short of remarkable’ – Who crashed the economy, 14th September 2014.