Oil prices plunge

The price of oil fell to its lowest level for eight months today as fears over the global economy deepened.

Light, sweet crude for November delivery traded on the New York Mercantile Exchange fell more than four dollars to $89.07 (€65.3) a barrel at one point before rising back up over 90 dollars. The world’s benchmark price was last as low on February 7.

In London, Brent futures also fell to $85.65 (€62.8) a barrel, their lowest level since January 22.

The Nymex oil price is now nearly 40% cheaper than the $147 (€107) high recorded in mid-July as fears over the impact of a slowing world economies will have on demand.

Today’s fall comes amid signs the economic turbulence is intensifying in Europe, with a massive bank rescue in Germany, and despite the approval by US Congress at the end of last week of the White House’s 700 billion dollar banking bail-out.

Damien Cox, senior energy analyst at John Hall Associates, said: “The drops are down to concerns about growth in the world economy. There is a lot of concern what the impact of a slowdown will have on demand in the US, Europe and elsewhere.”

He added that concerns over the ongoing situation could see further price falls toward the $80 (€58.6) a barrel mark, potentially prompting oil production cartel Opec to reduce production in order to protect prices.

“It may be Opec agree to act together, or that Saudi Arabia acts unilaterally,” Mr Cox said. “But concerns over demand are outweighing those over cutbacks in production at the moment.”

UK drivers have yet to see anything like the oil prices falls filter down to the country’s petrol station forecourts, despite a series of price cuts by the big supermarket retailers.

Average petrol prices over the weekend were 109.9p a litre, 8% lower than this year’s high of 119.9p seen on July 17. Diesel prices averaged out at 121.54p, 9% lower than the 133.3p high.

At the end of last week, Asda cut the price of a litre of unleaded by a penny to 105.9p and of diesel by 2p to 116.9p at its 170 plus petrol stations across the UK.

A spokesman for the Petrol Retailers Association said oil price changes took between six and eight weeks to filter down to forecourts.