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Traders report ‘total panic’ as oil price plunge continues
Bill Condie16 Sep 2008
The oil price was plummeting on Tuesday, registering its biggest falls in four years and down below $90 a barrel — less than a week after it crashed back through $100 a barrel.
Trading in the global commodity markets was frantic overnight, with traders in the Far East talking of “total panic”.
With the price of oil crashing overnight, Brent Crude opened in London today at as low as $89.80 before stepping back marginally to trade at $90.24, a fall of $4 from its close last night. The price of US oil on the Nymex exchange also plummeted, falling $3.57 to $92.14.
The latest falls — the crash since the start of this week represents the worst two-day performance for oil since 2004 — means the price of oil has now come back nearly 40% since the peak of more than $147 a barrel in early July.
The plunge in the price of oil comes on the back of fears for the state of the US economy, the world's largest, which is in a serious downturn and now in the throes of financial crisis.
“Prices were too high because we're looking at a recession — we're looking at dropping demand,” said Peter Beutel of US energy consultants Cameron Hanover. “Oil is not a safe haven.”
The fall in the price of oil is being seen as more remarkable as it comes against a backdrop of hurricanes in the Gulf of Mexico, the main US producing area, and indications from the Opec cartel of major oil producers that it will slow output to force the price up.
The oil price had surged through last year to this summer on soaring demand in Asia and especially China in the run up to the Olympic Games.
Industry figures, however, are now suggesting demand falling over the next year on the back of recession among major Western economies and falling demand from China.
Many believe the oil price had also been talked up by speculators and the current slump in price followed their exit from the market.
Reader views (2)
Fuel prices can't drop by 40% because more than 60% of the price is a fixed tax!
You can be sure that the supermarkets will cut in line with falling refinery output prices, because they use cheaper fuel whenever they can to persuade customers into their store rather than one of their competitors. And where Tesco leads, the oil companies have to follow. But it's a pipeline, the crude oil at the price you see in the paper has to be delivered to the UK in a supertanker and then be refined.
- Nigel, London, 16/09/2008 14:51
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Iwonder how long it will take fuel prices to drop by 40%. my bet is many months and in that time shell, BP etc etc will only be making more money on our back.
- Jil, london uk, 16/09/2008 11:35
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