One the United Kingdom’s largest banks is warning oil prices could sink as low as $10 a barrel.
Banking and financial services company Standard Charter said Tuesday, “we think prices could fall as low as $10 a barrel before most of the money managers in the market conceded that matters had gone too far.”
Brent crude briefly hit a 12-year low of $30 Jan. 12, marking an almost 20 percent drop in the price of oil since the beginning of the year. Only two years ago, oil was trading at $100 a barrel.
Standard Charter stands out as the most bearish on oil prices among the major financial institutions including Morgan Stanley, Goldman Sachs and RBS.
“Given that no fundamental relationship is currently driving the oil market towards any equilibrium, prices are being moved almost entirely by financial flows caused by fluctuations in other asset prices, including the dollar and equity markets,” the bank said.
Prices plummeted during trading hours after the United Arab Emirates’ energy minister contradicted the chair of the Organization of the Petroleum Exporting Countries (OPEC) Emmanuel Kachikwu, saying there would be no emergency meeting and that the cartel’s strategy is working.
The world market is awash with oil. Major oil-producing countries are failing to cut supply. Markets are also deeply concerned about a further fall in Chinese demand as growth in the world’s second-largest economy continues to slow.
OPEC’s decision to refuse to cut production combined with a stronger dollar and shale producers has put downward pressure oil prices for close to two years.
BP announced it was shedding 5 percent of its workforce — 4,000 jobs — thanks to the low price Tuesday. The company’s share price has fallen 9 percent this year alone.
Low prices may be bad news for the industry but they’re great news for consumers with the average national gasoline price standing at $1.95 a gallon.
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