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The oil price plunges to $85 a barrel on the back of the IEA's monthly report

by , 15 October 2014

Last night, the oil price continued its hefty fall.

Yesterday, the International Energy Agency (IEA) said it forecast robust supply and it cut its growth forecast for next year.

Over the last few months, the oil price has dropped over 20%.

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

The oil price continues its tumble on poor demand and plentiful supply

The price of Brent crude oil has fallen drastically over the past few months “on concerns of oversupply, as output increases and demand wanes,” reports the BBC. The IEA blames the drop on supply and demand factors.

The agency says there would need to be “further oil price drops… for supply to take a hit or for demand growth to get a lift,” adds the BBC.

The IEA sees demand for oil to grow at a much slower pace than previously forecast next year, says IOL. Oil prices may continue to tumble “so long as OPEC shows no signs of countering a supply surge”.

Demand for oil is back at post-financial crisis levels

Ole Hanson, an analyst at Saxo Bank, said the IEA’s monthly report led to the plunge in the oil price, notes iAfrica. The agency predicts growth rising at its “slowest pace since 2009”.

Mr Hanson says if production levels remain at the same rate of growth, they “will outstrip demand growth,” adds iAfrica. This is “adding to the current negative sentiment in the market”.

The cut in forecasts for oil demand next year come just after the International Monetary Fund slashed “its forecast for global economic growth for this year and next,” notes the BBC. The market is worrying about “the strength of the global economy”.

At time of writing, Brent crude oil was trading at $85.11 a barrel.

So how low can oil go? It looks like the oil price may fall below $85 a barrel.

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The oil price plunges to $85 a barrel on the back of the IEA's monthly report
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