Triggered by a week of turmoil on financial markets and weak demand data out of the US, Brent crude fell as low as $83.84, taking its losses for the week so far to more than $11 per barrel, or 12 per cent. Data on Wednesday also showed the U.S. services sector slowed while the euro zone economy probably shrank last quarter, according to a survey.
In comparison, oil was trading above $97 a barrel early last week, having risen by some 35 per cent since June and triggering warnings that it was heading back over $100.
The turnaround, including a $5 drop on Wednesday alone in what was the biggest daily decline for more than a year, even after a meeting of a ministerial panel of OPEC+, the Organization of the Petroleum Exporting Countries and allies led by Russia made no changes to the groups output policy.
Saudi Arabia said it would maintain a voluntary cut of 1 million barrels per day (bpd) until the end of 2023, while Russia would keep a 300,000 bpd voluntary export curb until the end of December.
No doubt this week’s fall will offer respite for motorists who have seen fuel prices soar in recent months.
It will also be welcomed at the Bank of England and on Downing Street after both Andrew Bailey and Rishi Sunak vowed to bring inflation back under control.
‘Higher oil prices had been on the factors behind renewed angst over inflation,’ said Neil Wilson, chief market analyst at Markets.
Having reached $97 last week, worries that inflation would prove persistent fuelled fears that interest rates would remain higher than previously expected and for some time.
That has driven up borrowing costs – triggering fears about the outlook for the global economy and in turn demand for oil.
For next week fuel card users can expect to see a fall in the region of 1.5 pence per litre depending on card type.
