Crude oil at lowest price for more than three years

Crude oil fell below $50 (€40) a barrel to its lowest level for three and a half years today amid fears over the impact of a global downturn on demand.

Brent crude for January delivery sank to $48.45 (€38) in London – the lowest since March 2005 – after a fresh round of dire economic news.

Light, sweet crude on the New York Mercantile Exchange – the benchmark price - also slipped to $49.91(€39.8) for December delivery. This is around a third of the $147.27 (€117) peak reached in mid-July.

Sharp falls on global stockmarkets this week have reflected worsening fears over the economic outlook.

A sudden plunge in US inflation figures yesterday raised concerns over a possible deflation threat, while today unemployment claimants in the world’s largest economy jumped to a 16-year high.

Toby Hassall, an analyst at Commodity Warrants Australia, said: “People are saying this slowdown could be the worst since the Great Depression.”

He added: “The stock markets are representing investor pessimism regarding the economic outlook and what we have in store over the next year.”

Concerns that US Congress may decide not to approve a $25bn (€20bn) rescue package for ailing car makers General Motors, Ford and Chrysler helped drag the Dow Jones industrial average down 5.1% yesterday to its lowest level since March 2003.

Yesterday, several UK retailers announced they were cutting the price of petrol at the pump as retailers came under pressure to reflect the falls in the price of crude, which has plummeted from a $147 (€117) high in July.

Asda’s 10th consecutive cut since July brought petrol prices to their lowest level since April last year, at 90.9p per litre. Sainsbury’s, Tesco, Total and BP all followed suit.

The news came as the AA revealed the price of petrol had fallen by a record amount over the past month.

Average UK prices dropped from 106.4p a litre in mid-October to 94.86p a litre in mid-November.

Compared with mid-July, when petrol prices peaked at 119.7p a litre, a tank of petrol now costs £12.42 less.

It is believed that a production cut by the oil countries of cartel Opec may stop prices falling further.

The group is holding an informal meeting later this month ahead of its official December conference and Opec president Chakib Khelil has signalled that the organisation may announce production cuts at the formal summit.

But Mr Hassall said: “It’s going to take a pretty big supply-side response from Opec at their next meeting to provide some support.