Stability proves short-lived as oil prices resume slide

Oil prices had appeared to stabilise in a range nearly 15 per cent higher than the depths they had reached in late January. Photo / Thinkstock

The price of oil is tumbling again, rattling an already-shaken oil industry and heralding lower prices for consumers.

The price of oil fell 10 per cent last week, approaching its lowest price in six years. Many expect it to fall further in the coming weeks because supplies are rising and the United States summer driving season is still months away.

The lower crude prices will mean gasoline prices will slide lower in the coming weeks, and many drivers are likely to pay under US$2 a gallon in the summertime for the first time since 2004.

Oil prices had appeared to stabilise in a range nearly 15 per cent higher than the depths they had reached in late January. But on Saturday the International Energy Agency called a recent rise in oil prices a "head fake" and a "facade of stability".

"The rebalancing [of supply and demand] triggered by the price collapse has yet to run its course," the agency wrote in its monthly oil market report.

Oil began the day lower after the IEA, which advises industrialised countries on energy, warned the global glut was building and the United States might soon run out of tanks to store crude.

"US supply so far shows precious little sign of slowing down," the IEA said. "Quite to the contrary, it continues to defy expectations."

Some traders also worried about the prospect of Iran reaching a partial nuclear deal with world powers by the end of March and a full agreement by June. On Friday, oil fell US$2.21, or 5 per cent, to US$44.84 a barrel, within 40c of its low for the year of US$44.45.

Oil has collapsed from over US$100 because rising global supplies outpaced weak demand. The increase in US production last year was the third-biggest one-year increase in the history of the global oil industry, according to BP.AP