Oil prices drop close to six month lows, under pressure from high global inventories and doubts about OPEC's ability to implement agreed production cuts. Sonia Legg reports.
As one tap goes off another turns on - and oil prices are feeling the impact. Brent crude fell below $47 a barrel on Thursday - it's weakest in six weeks and close to six-month lows. U.S. light crude dropped close to $44. OPEC's plan to tackle oversupply is under threat for three reasons. (SOUNDBITE) (English) CCLA, CHIEF INVESTMENT OFFICER, JAMES BEVAN, SAYING: "First that the United States has demonstrated that every time the price goes up, it pumps more oil. Secondly there is less demand than had been anticipated. And thirdly even within OPEC there is not full compliance with the premise that there should be cuts. So for example we have Nigeria, Libya and Iraq pumping more oil than have been expected." OPEC and its allies, including Russia, have promised to restrict output until at least the end of the first quarter of next year. But inventories are near record highs in many parts of the world. (SOUNDBITE) (English) CCLA, CHIEF INVESTMENT OFFICER, JAMES BEVAN, SAYING: "I do worry that the OPEC deal will collapse because they are wearing the hair shirt of reduced production and therefore reduced revenue in anticipation that this will lead to prices. If they find however that reduced production simply give its benefits to third parties. That does mean that the deal is very dangerous." While OPEC, Russia and others have agreed to reduce output by 1.8 million barrels per day - the U.S. has raised its daily rate to 9.3 million. That means production in the States has now increased by 10 percent over the past year. And it's not stopping there - OPEC predicts America will increase output by 800,000 barrels a day in 2017. The International Energy Agency now sees supply continuing to outpace demand next year, even though daily consumption is expected to hit 100 million barrels for the first time.