This afternoon, oil prices continued to drop after slipping down to their lowest point within a period of eight months. The decline in the prices comes after the markets were hit by the increased supply from the United States of America and a slowdown in global trade.
The prices of the international standard, Brent crude, declined by five percent to $63.38 per barrel (£49.43) this afternoon. It extended on losses that were made earlier in the same day.
One of the analysts at CMC Markets, David Madden, stated: “Oil had endured a heavy day of selling as investors are worried about supply.”
He added: “US stockpiles are rising, the global economy is slowing, and there is a perception that future demand will be weak.”
He continued: “To add to the mix, production from Libya has soared, and there is talk that production could be ramped up even further.”
Initially, the prices increased this morning. The price increase comes as some speculators anticipated a reduction in the production from the Opec group of oil-producing nations.
However, a broad sell-off that was experienced later in the day sent the cost of Brent crude oil eventually spiralling down.
The decline comes after the International Energy Agency (IEA) released a warning that the cuts to global supply could have an effect on the international markets.
Yesterday, Fatih Birol, the chief of the IEA, urged the producers to show common sense. He stated: “Currently markets are very well supplied but we should not forget that spare capacity in Saudi Arabia is very thin, therefore cutting the production significantly today by key oil producers may have some negative implications for the markets and further tightening the markets.”
He added: “My appeal to all producers and consumers across the world is to have common sense in these difficult days.”