OIL PRICES dived last night after Saudi Arabia stopped cartel Opec from cutting production.
Traditionally, the Organisation of Petrol Exporting Countries cuts production to shore up prices, but Middle Eastern countries are reacting to other factors, such as a rise in US oil output, which is more expensive to pump than Saudi oil
Brent crude prices fell 6.6 per cent last night, to $72.60 per barrel.
The crashing price could have serious knock-on effects for the rest of the financial system, with oil firms potentially restructuring debts.
“If oil went below $60 a barrel and stayed there for a year, we might see a majority of triple-C rated energy firms and perhaps 25 per cent of single-B firms restructure their debts,” predicted Legal and General’s Ben Bennett.
Tens of billions of dollars in losses could then cause investors to flood out of the energy sector bond market, and potentially hit the rest of the high yield market, he said.
Rosneft’s boss said prices could fall significantly lower. “We anticipate a possibility of a fall in prices to $60 and lower, but only in the first half of the year,” Igor Sechin told Austrian newspaper Die Presse.
“$60 suits us fine. [Although] of course, we will be forced to postpone some expensive projects.”