Oil prices have been rising since the OPEC nations, as well as other producers including Russia, decided to restrict output last year.
Last November they agreed to extend those cuts until the end of 2018.
President Donald Trump has said that unless European allies fix what he has called “terrible flaws” in the accord by May 12, he will restore US economic sanctions on Iran.
The other nations that signed the deal – France, Germany, the UK, Russia and China – all want to keep in place the agreement, which has halted Iran’s nuclear program in return for most international sanctions being lifted.
Oil prices have jumped after oil producing countries that are not OPEC members agreed to cut output.
Brent crude oil price surged to $57.89 a barrel – the highest since July 2015 – before falling back to $56.55, although that was still a gain of 4.1% on the day.
On December 10, non-OPEC countries agreed to cut their output by 558,000 barrels a day in a deal designed to reduce oversupply and boost prices.
OPEC announced last month that it would be cutting its own production.
It committed to halting the supply of 1.2 million barrels a day, starting from January.
The new deal is the first global pact in 15 years.
Saudi Arabia has also signaled it could cut its output more than first suggested – something that could further lift prices.
But some expressed doubts about the deal’s long-term chances of success.
Those taking part in December 10 deal included Russia – which will provide the lion’s share of the cut – as well as Mexico and Bahrain among others.
The move comes after more than two years of depressed oil prices, which have more than halved since 2014 due to a supply glut on the market.
Oil price has fallen below $35 a barrel for the first time in 11 years.
Brent crude sank by 4.2% to $34.88 a barrel, surpassing its late December fall, and taking the price to its lowest level since July 1, 2004.
The price of US crude dropped 3.3% to $34.77 a barrel.
The sharp falls followed a short-lived rally on January 4 after Saudi Arabia severed diplomatic ties with Iran.
Analysts said fears over the worsening relations between Saudi Arabia and Iran, which had initially raised concerns about possible supply disruptions and boosted the oil price, had now been overtaken by pessimism over oil cartel OPEC ever agreeing on a production ceiling.
Photo Reuters
Historically, OPEC has cut production to support prices. But led by Saudi Arabia, by far the group’s most powerful member, the group has resolutely refused to trim supply this time.
Rising tensions over Saudi Arabia’s execution of Shia cleric Sheikh Nimr al-Nimr mean that any agreement is now deemed less likely than ever.
Since mid-2014, oil prices have slumped 70% mainly because of oversupply. This in turn is largely due to US shale oil flooding the market.
At the same time, demand has fallen because of a slowdown in economic growth in China and Europe.
Iranian oil exports are also expected to rise later this year once Western sanctions against Tehran for its nuclear program are lifted, increasing the oversupply of oil.
OPEC is hoping that refusing to cut production will help to drive US shale producers out of business, believing that they will fall victim to lower prices long before its own members, and has forecast that prices will recover to $70 a barrel by 2020.
Goldman Sachs has warned that oil prices could go as low as $20 a barrel, but most analysts are expecting the price to stabilize in the second half of the year as supply from non-OPEC nations slows and demand remains relatively robust.
Brent crude oil price has fallen below $59 a barrel for the first time since May 2009.
After dropping below $60, the Brent price then fell to $58.50 a barrel, before recovering slightly to $58.94.
Oil prices have now nearly halved since June as a result of waning demand and increased supplies.
The latest fall was triggered by news of a fall in industrial activity in China, the world’s second largest consumer of oil.
The price of US crude fell by $1.73 to $54.18 a barrel.
At the weekend, the head of OPEC reiterated that the oil cartel would not try to shore up the oil price by reducing production.
The comments came a couple of days after the International Energy Agency cut its oil demand forecast for 2015.
While lower oil prices could provide a boost to many economies through cheaper fuel, the sharp drop in the cost of crude is affecting many oil producers.
On December 16, Russia dramatically increased its interest rate from 10.5% to 17% in an attempt to halt the slide in the country’s currency, the ruble.
The ruble has lost 50% against the US dollar this year as falling oil prices and Western sanctions continue to weigh on the country’s economy.
However, early signs were that the attempt to defend the currency had failed, with the ruble hitting fresh lows against the dollar.
With high levels of output from the US and no sign of a sustained economic recovery in Europe, most experts believe prices will remain low for the foreseeable future.
However, the low cost of crude may also make investment in some new wells uneconomical – which means prices could rise in the longer term.
Goldman Sachs has estimated that about $930 million of investment in new oil projects could be hit, given the recent plunge in oil prices.
Without this investment, new oil output could be cut by about 7.5 million barrels a day by 2025, or about 8% of current demand, the bank estimates.
Brent crude oil price has fallen at a four-year low, from $3.60 or 4.4% to $77.52.
The benchmark US crude oil price is also at a four-year low, after losing $2.57 to close at $74.28.
The price has fallen sharply since the summer and is 30% below its June price.
The drop comes as traders believe members of the OPEC oil exporting countries, which control about 40% of world oil exports, will not cut production.
Brent crude oil price has fallen below $80 a barrel
OPEC’s 12 member countries will meet later this month to discuss the global oil market.
Lower oil prices typically prompt OPEC nations, which include the biggest oil exporting nation in the world, Saudi Arabia, to rein back output in order to limit supply and boost prices and income.
Most need higher oil prices to fund rising government spending.
Recent comments by oil ministers from Saudi Arabia and Kuwait suggest the group is unlikely to agree to a cut.
The US energy department said this week that it expected low fuel prices to last into next year.
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