Falling oil prices have been one of the biggest stories in financial circles over recent weeks. Brent crude has fallen this week by almost 10 per cent, and prices are now down 34.2 per cent from where they were at the end of June (at over US$110 a barrel). Oil prices are now back at levels not seen since September 2010.
The weakness in oil is largely supply related. Non-Opec countries like the US, Brazil and Canada have ramped up supply, while Libyan production in back on stream. However, the weakness also reflects slowing global demand and, in particular, a moderation in demand from China.
With Opec choosing not to cut supply and shore up prices, recent moves have become sharper.
Where the oil price goes from here is difficult to predict, with some forecasters calling a bottom already and others suggesting that prices could fall as low as US$40-50 a barrel. The general consensus seems to be that we could see a little more weakness from here, with prices falling another 5-10 per cent to US$65-70, before we see a rebound and prices settle in a US$70-80 range.
Whether falling oil prices are good or bad depends on your perspective.