Oil prices fell to near four-month lows on Monday after a steep drop in Chinese stock markets and on more evidence of a global oil supply glut that has halved prices over the past year. Sonia Legg reports
A steep drop in Chinese stocks had an impact on the oil market too - prices hit a four month low. Brent crude for September touched $54.25 a barrel, down 37 cents. Brent was down 15 cents at $54.47 and And U.S. crude for September was down 26 cents at $47.88 a barrel. Combine that with U.S. oil producers adding 21 drilling rigs and fears about a global glut are growing. Darren Sinden is from Admiral Markets. SOUNDBITE: Darren Sinden, Market Commentator, Admiral Markets, saying (English): "There's an abundance of oil and gas products at the same time as we have falling demand in Europe and perhaps more importantly in Asia where the growth has come from." BP, Shell and Chevron are cutting costs as a result of the fall. One new report suggests $200 bln of spending has been shelved globally. There may be benefits to consumers from low prices but the scale of the cuts could offset that. SOUNDBITE: Darren Sinden, Market Commentator, Admiral Markets, saying (English): "There will be more money in people's pockets to spend in the shops, so better for consumer demand, but the reality is the big cap ex projects that the oil companies are cancelling and the number of jobs that are dependant on those I should think they would easily outweigh the benefits to the wider consumer." There's no sign of an end to the low prices. Exports from Iraq's southern oil fields are reportedly on course for a monthly record. The lifting of sanctions against Iran will bring them back into the market. And Saudi Arabia and other OPEC members may increase output too. Some see low prices lasting well into next year and possibly even beyond.