Brent Oil Price Continues Decline - US Oil Inventories Hit 21 year High

US Oil Inventories UP

Just a month ago when Stowawae spotted a "double-top" on the Brent Crude Oil price chart Brent Crude was at US$110 a barrel.  Today it is $29 lower.  One reason is that US oil inventories are at 21 year highs due to a sluggish US economy.   Market opinion seems to be that there may be another $5 to go on the downside (in fact the day after posting this it is now $89) -  However anything below $90 is going to get OPEC very concerned and there will be calls by most members for the Saudis and the few other members with spare capacity to cut production. 

One unlikely scenario at present is that sanctions against Iran will be lifted allowing exports of their oil to the West.  Sanctions will remain whilst Iran and the West are deadlocked about Iran's nuclear programme which the West believes is aimed at producing nuclear weapons rather than energy production as Iran claims.   Opec would like to see oil in a price range of $100 to £110 and by tweaking production could probably achieve this as long as world demand does not fall further from its present level. 

It would certainly be nice if the price of petrol could come down further.  One forecourt I saw (but avoided!) last week was charging £1.43 a litre!!!!! Not far down the road the price was the more usual £1.33.   Guess which one I went to?   With the benchmark Brent Crude price now well under US$100,  hopefully the fuel surcharge that air passengers now pay will be reviewed and reduced by airlines.  Having said that, the first quarter accounts of IAG, parent company of both BA and Spain's Iberia, showed that it made a Q1 loss of $189 million which it attributed to high fuel and other costs.  It's therefore possible that a prolonged period of  lower fuel prices will be needed before airlines respond on their fuel surcharges.