Oil price posts two-year highs - but how long can it last?
Brent rose above $59 a barrel this week, its best third-quarter showing since 2004
Oil price drop is 'giant tax cut for UK economy'
19 January
The dramatic fall in the oil price will spur the UK economy to grow faster than had been predicted this year, according to influential forecaster the EY ITEM Club.
The Chancellor had expected 2.4 per cent growth – but ITEM says 2.9 per cent is possible. That is also a 0.5 per cent upgrade on the Club's last prediction, made in October.
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The revision was made because falling oil prices are expected to boost consumer spending, reports Sky News.
Reacting to the news, Danny Alexander, Lib Dem chief secretary to the Treasury, said: "Falling oil prices act like a giant tax cut to the UK economy and will further boost our already established recovery."
The price of Brent crude has fallen by more than 50 per cent since last June. The Club's chief economic adviser, Peter Spencer, said: "Not every economy will be a winner from oil prices collapsing, but the UK certainly is.
"While it is not a game changer in terms of growth prospects, falling oil prices come just as the recovery was losing momentum and will move the game up to a higher level for a year or two."
The ITEM club also predicts that inflation will stay at around zero in 2015 – with a little deflation in the early months of the year. That should in turn mean the Bank of England will keep interest rates lower for longer.
ITEM predicts that rates will not rise from their current record low of 0.5 per cent until early in 2016, after which it predicts the Bank will raise the rate by 0.25 per cent every three months.
Oil price plunge leads BP to cut North Sea jobs
15 January
Oil giant BP will to announce job cuts at the company's North Sea operation today in the latest sign that the falling oil price is hitting the British petroleum industry.
The company is expected to brief employees in Aberdeen today about the swathe of job losses. BP employs 4,000 people in the North Sea and 11,000 more around the UK.
BP announced that it would undertake restructuring in December last year following the collapse of oil prices due to low demand in conjunction with the growing oil glut. The price of oil has fallen in the space of a year from a peak of around $115 last summer to less then $47 this week.
Businessman Sir Ian Wood said that up to 15,000 jobs could be lost in the North Sea as a result of falling prices.
Shell cut 250 North Sea jobs last August, and Chevron cut 225 in July. Earlier this week, the Daily Telegraph revealed that Tullow Oil would also be announcing job cuts by the end of the first quarter.
Many companies, including Chevron and Wood Group have frozen salaries for employees and cut contractors' pay.
BP has also accelerated plans to cut back-office jobs around the world, including many in the UK and the US. The company has been downsizing since its catastrophic oil spill in the Gulf of Mexico in 2010, but BP executives say that tumbling global oil price is speeding the process.
Bank of England governor Mark Carney said that the falling oil price has come as a "negative shock" to the Scottish economy, which relies heavily on North Sea reserves. But he insisted that overall the falling oil price was good for the UK economy, and had been instrumental in the current ultra-low inflation which could help to boost consumer spending, the BBC reports.
But Edinburgh-based energy analysts Wood Mackenzie said that the long-term impact of the low oil price could be problematic for the fossil fuel industry.
If Brent crude falls to $40 a barrel, oil companies will start shutting down production wells, the group told Scottish Energy News.
UK energy secretary Ed Davey will travel to Aberdeen today to discuss the situation with oil and gas executives.
Oil price: Brent crude tumbles as Goldman Sachs cuts forecast
12 January
The oil price fell again today as global investment firm Goldman Sachs became the latest group to predict that prices will stay low in 2015 and 2016.
It now says that Brent crude, the global benchmark, will average just $50 per barrel in 2015 and $70 per barrel in 2016. The company had previously forecast prices of $83 and $90 respectively.
Opec is likely to keep the oil price down in a bid to tackle the growing US shale industry, Goldman Sachs said.
"To curtail investment in shale until the market has re-balanced, we believe prices need to stay lower for longer," its report advised. The search for a new equilibrium in oil markets continues."
The price of Brent crude fell by two per cent this morning, to $48.80 per barrel, its lowest point since May 2009.
The drop in oil price had an immediate effect on the rouble. It fell by 2.5 per cent this morning to 62.8 roubles to the US dollar, The Guardian reports.
Prominent Saudi businessman Prince Alwaleed bin Talal says the oil price will continue to fall unless producers act by cutting the supply.
"If supply stays where it is, and demand remains weak, you better believe it is going to go down more," he told USA Today. "But if some supply is taken off the market, and there's some growth in demand, prices may go up. But I'm sure we're never going to see $100 anymore."
However, the prince dismissed suggestions that Saudi Arabia and the US were artificially lowering prices to hurt Russia as "baloney and rubbish":
"I'm telling you, there's no way Saudis will do this. Because Saudi Arabia is hurting as much as Russia, period. Now, we don't show it because of our big reserves. But I'll tell you, Saudi Arabia and Russia are in bed together here. And both are being hurt simultaneously."
UK motorists, on the other hand, have reason to celebrate the falling oil price. A garage in Birmingham has become the first in the UK to lower the price of petrol to below the £1 mark.
Harvest Energy forecourt in Kings Heath reduced the price of unleaded to 99.7p a litre yesterday afternoon, the Birmingham Mail reports.
Oil price: consumers 'must benefit from lower prices'
8 January
George Osborne said that it is "vital" that customers should benefit from falling oil prices at the petrol pumps, in the cost of airfares and in their utility bills.
The Chancellor tweeted that the savings made by companies as a result of lower oil prices must be "passed on to families".
Osborne said he has launched a Treasury investigation into which companies are passing on the benefits of low oil prices to customers and which are not.
Fuel companies have already reduced the cost of petrol after Danny Alexander, the chief secretary to the Treasury intervened. The big supermarket chains have cut the cost of a litre of unleaded close to the £1 mark.
A Treasury spokesman said: "The Government is conducting studies of industries like the utilities and the airlines. We are examining if any action needs to be taken."
Ministers said that they would be watching utilities companies and airlines "like a hawk" to ensure that they dropped their prices, the BBC reports.
Lawrence Slade, the CEO of Energy UK said that savings on wholesale gas prices were being passed on to customers.
"When people shop around they can easily find deals that are over £100 cheaper than this time last year and in line with cuts in wholesale energy prices," he said.
Oil prices have halved over the past six months. Brent Crude, the global benchmark, has fallen from $115 per barrel last summer to less than $52 today.
Falling oil prices could be good for consumers and businesses, The Guardian says. "Lower oil prices will lead to higher disposable incomes and cut business costs", the paper said.
But Labour insisted that the Conservatives must do more to ensure that savings benefited consumers. Shadow energy secretary Caroline Flint said Osborne had done "absolutely nothing" to address firms' failures to adjust their pricing. "We need action, not another inquiry," Flint said.
Oil price: stocks dive as US oil falls below $50 a barrel
6 January
Stock markets around the world fell sharply yesterday as the price of US oil dipped below the symbolic threshold of $50 a barrel.
West Texas Intermediate fell to $49.22, while Brent Crude, the global benchmark ended the day at $52.08. Experts now predict that oil prices could go as low as $40 or even $30 a barrel.
Investors are concerned that the combination of weak demand for oil and a growing global glut will cause prices to continue their downward trend.
The falling price is good news for consumers, who are enjoying lower petrol prices. In the UK all four big supermarkets have announced further fuel price cuts this week, which will bring petrol close to £1 a litre, the BBC reports. In the US, petrol is now below $2 a gallon at nearly 40 per cent of US petrol stations – the lowest level in six years.
But the decline is not all good news. Sustained low prices could begin to "really hurt energy company stocks" says CNN, and are affecting jobs as well.
"Falls in oil prices are going beyond many people's expectations. This will put pressure on the earnings of US energy firms," said Hirokazu Kabeya, senior strategist at Daiwa Securities.
The biggest US stock losers on Monday were almost all in the energy sector – Noble Energy, Diamond Offshore Drilling and Anadarko Petroleum. Overall, energy companies had their worst day since last November, when oil first dipped below $70 per barrel.
US oil production has increased significantly in recent years as fracking – or hydraulic fracturing – has spread across the country. As US output has increased, Opec has chosen not to restrict its own rate of production, leading to fears of a global glut. Simultaneously many parts of the world, including China and Europe, are gradually lowering their annual consumption of oil.
The tumbling oil prices caused Asian shares to fall this morning and the euro is also approaching a new nine-year low against the dollar, Reuters reports.
Oil price rebounds, sparking hopes of recovery
22 December 2014
Oil prices jumped by 2 per cent overnight, bringing up the cost of Brent crude by more than $1 per barrel to $62.64, but the gains come as Saudi Arabia's oil minister confirmed that there would be no cut in production despite the recent dramatic decline in oil prices.
Saudi oil minister, Ali al-Naimi, said in Abu Dhabi on Sunday: "The kingdom of Saudi Arabia and other countries sought to bring back balance to the market, but the lack of cooperation from other producers outside Opec and the spread of misleading information and speculation led to the continuation of the drop in prices."
According to al-Naimi, if producers outside Opec want to cut production "they are welcome, [but] we are not going to cut; certainly Saudi Arabia is not going to cut."
In spite of al-Naimi's hard line, the overnight jump in the oil prices has given most major European stocks a lift. All the major European stock markets are up this morning, The Guardian reports, as energy companies make gains.
The FTSE 100 has increased by 64 points to 6610, led by BP (up 2.2 per cent), Royal Dutch Shell (up 2.7 per cent) and Tullow Oil (up 2.5 per cent).
According to Stan Shamu, an analyst at UK stockbrokers IG Markets, some investors believe that oil prices could continue their upward trajectory.
"After seeing a rebound on Friday, many have been calling a bottom in oil prices and feel this is a beginning of a recovery."
Opec's Secretary-General Abdullah al-Badri told Reuters on Sunday that he hoped to see a recovery in the price of oil by the second half of 2015.
"We hope the price would rebound by the end of the second half of 2015," he said. "We can't see the market now, we have to wait until the end of the second half of 2015 to see how the market [will] react to these low prices."
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