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The oil price falls below $88 a barrel as supply outweighs demand

by , 14 October 2014

Yet again, the oil price is falling. Earlier today, the price of Brent crude oil fell below $88 a barrel.

With an ample supply of oil and concerns over global economic growth, the oil price continues to ebb under pressure.

Let's take a closer look at what's going on…


The oil price is down over 20% in less than four months


Since June when Brent crude hit its high of the year, the price is down “more than 20%,” reports Fin24. The main factors playing on the oil price are rising supply, and slowing demand in China, Europe and the US.

Investors in oil were “expecting a production cut from OPEC to support prices,” says BDLive. But main oil producers “Saudi Arabia and Kuwait played down the possibility of the organisation reducing output”.

Analysts at Commerzbank says “OPEC countries appear to be more interested in defending their market shares at present than stabilising prices,” adds iAfrica.


Could the oil price pick up towards the end of the year?


A commodity strategist at ANZ, Ankit Pahuja, says this is a time of weak demand for oil, says Fin24. They see “more scope for recovery in November and December”.

Analysts at Morgan Stanley also believe there could be a bounce higher in the oil price come the end of the year, notes BDLive. This would coincide with the “peak seasonal winter demand in the northern hemisphere”.

Earlier today, the International Energy Agency cut “its forecasts for growth of oil demand for the third month in a row,” notes MoneyWeb. But the agency believes this may be the bottom and “supplies may soon begin to slow down”.

At time of writing, Brent crude oil was trading at $87.86 a barrel.

Time will tell if the lower oil price is short-lived and it starts to recover in the next couple of months.

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The oil price falls below $88 a barrel as supply outweighs demand
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