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The oil price slips below $85 a barrel… If it continues to slide, another fuel price cut may be on the cards

by , 04 November 2014

Yesterday, the price of Crude oil fell nearly 2%. The stronger dollar took its toll and pushed the oil price firmly lower.

Oil wasn't the only victim of a stronger greenback, gold suffered too.

Let's take a closer look at what's going on with the oil price…

Yesterday, the oil price fell hard

The oil price came under renewed pressure yesterday, reports BDLive. The “stronger dollar outweighed evidence of lower oil production by OPEC ahead of the producer’s group meeting later” this month.

The fall in the price of crude oil took it “to yet another multi-year low and the lowest level of its most recent breakdown,” says Business Insider.

With the stronger dollar appearing to be the main driving force behind the lower oil price, what lies in store?

A senior currency strategist at Commerzbank AG, Lutz Karpowitz, told Bloomberg that “all arguments are in favour of the dollar”. He says “underlying dollar strength” is justified.

Just back in June, Brent crude oil was trading at $115 a barrel, says BDLive. But that was before “abundant supply has overwhelmed demand”.

The market isn’t expecting a recovery in the oil price any time soon

Looking to the futures prices for Brent crude, December contracts are priced at $85.46, adds BDLive.

This shows that, as it stands, the market isn’t expecting any significant recovery in the oil price, probably on the basis of the dollar retaining its strength.

The good news for South Africans is that if the oil price does remain suppressed, and the rand plays along too, more fuel cuts could be on the cards for December.

Tomorrow, prices at the pumps will fall significantly as the weaker oil price helped offset import costs. Petrol will drop 45c a litre. And diesel will drop between 60c and 61c a litre.

At time of writing, Brent crude was trading at $84.30 a barrel.

Time will tell how the oil price performs.

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The oil price slips below $85 a barrel… If it continues to slide, another fuel price cut may be on the cards
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