Oil prices to fall lowest for four months

Oil prices fell to their lowest level for about four months today amid expectations that slower world growth would reduce demand.

Light, sweet crude traded on the New York Mercantile Exchange – the world’s benchmark price – touched 112.75 US dollars before edging up slightly. It is nearly 25% lower than the 147.27 US dollars seen in the second week of July.

The drop came after Europe’s biggest economies – Germany, France and Italy - contracted during the second quarter. Japan also said this week that its gross domestic product shrank between April and June, while Bank of England Governor Mervyn King warned that the UK economy was likely to shrink in the coming year.

Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore, said: “Worries about an economic slowdown in the US and Europe, and even Japan, are weighing on the oil market.”

Oil also fell despite the continuing tensions between Russia and Georgia.

In the UK, average petrol prices have fallen 6.5p to 113.15p during the past month, the AA said. Petrol prices peaked on July 17 at 119.7p per litre.

The average price of diesel has fallen from 131.56p per litre to 125.58p, a saving of 6p a litre.

But filling up a tank is costing normally £1 more than it should, the AA has argued, based on falling wholesale prices which are down 18%.

That equates to an 8.5p per litre reduction in the average price of unleaded petrol, taking it down to 111.2p.

The AA’s Paul Watters said: “Whichever way you look at it, many drivers are being short-changed by around a £1 a tank when they fill up with petrol in the UK. As well as undermining family budgets, selfishly holding back two pence a litre in wholesale price reductions is denying potential consumer spending at other local businesses suffering from falling sales.”