Oil prices slipped below $30 a barrel in afternoon trading as an emergency interest rate cut from the US Federal Reserve failed to calm fears about a global recession caused by coronavirus.
The Brent crude oil price was last down 11.1 per cent at $30.10, its lowest price since 2016. West Texas Intermediate was down 7.9 per cent at $29.23 per barrel.
Just three months ago in January the Brent crude oil price was above $65 per barrel.
The collapse in prices has been driven by Saudi Arabia’s decision to ramp up production to launch a price war with Russia. The move from the Gulf state came after price talks broke down at Opec.
Fears of the economic effects of the coronavirus outbreak have also driven prices lower, as traders price in lower consumption and production.
“We suspect that energy prices could fall further over the next few months owing to concerns about lower demand,” said Samuel Burman of consultancy Capital Economics.
He said demand would “fall sharply in the first half of this year, particularly in China, as road travel is down significantly and will probably remain weak for at least a while yet.”
Oil companies have been hit hard by the slump in prices, dragging down stock indices such as the UK’s FTSE 100 that are dominated by energy firms.
Shares in BP fell 6.1 per cent today to 259.4p. BP has lost 46 per cent of its value since the start of the year.
Shell shares lost 7.4 per cent today. It has dropped 56 per cent since 1 January to stand at 1,003.4p.
Paul Markham, global equities portfolio manager at Newton Investment Management, said falling oil prices do not even “seem to bring the silver lining which comes to economies in these situations in the form of cheaper energy as increasing numbers of consumers are falling ill, working from home or self-isolating”.