On Monday, oil prices continued to fall to a price not seen in the last seven years, the price has fallen so much recently that it is close to hitting the price seen during the financial crisis. The price drops have been brought about due to oversupply in the crude oil market. This oversupply is partly due to a failure of the OPEC countries (a group of large oil producing countries) to agree on a reduction in the current supply levels. Instead of agreeing on a reduction in supply at it’s meeting earlier this month the group actually scrapped its previous production ceiling, furthering fears of prolonged oversupply. However the OPEC countries are not the only contributors to a oversupply. Iran is ready to re-enter the oil market after the recent decision to lift sanctions on it’s production, Iran will reportedly be ready to pump out up to 1 million barrels within a week of the sanction being lifted.
Whilst low oil prices are generally considered to be positive for consumers as the low prices cause a drop in the price of petrol and diesel, the low prices come as bad news for energy providers and the banks that are lending to oil producers. The drop in prices was also felt by stock markets, such as the FTSE 100, which experienced a three year low. Although this drop can also be partly attributed to the ever increasing likelihood of the US Federal Reserve raising US interest rates this month.