Slowdown in Chinese economy and rising US output plunges price to new low with huge knock-on effects for UK’s North Sea oil industry

This article is more than 4 years old

This article is more than 4 years old

The price of North Sea oil has fallen to just above $32 per barrel, 72% lower than the peak of $115 reached in the summer of 2014.

The value of Brent crude was hit for the fourth day in a row, this time by figures from the US showing oil production had risen even higher despite the enormous supply glut.

Turmoil in the Chinese stock markets over fears of lower local economic growth also unnerved oil traders. China is the world’s second-largest user of oil and has driven most of the past growth in demand.

Oil prices could continue to slide with Saudi sights set on shale Read more

Prof Paul Stevens, an expert in petroleum economics at Chatham House, the foreign policy thinktank, said the value of oil may need to fall to $20 before some producers cut back and reduce supply.

“Storage is pretty much full and people are already talking about buying tankers as floating storage,” he told the BBC. “But if supply continues to outstrip demand, then the only one thing you can do with the oil is sell it.”

The current slump in crude prices is a boost to British motorists as it led to a fall in the cost of petrol. Some gas contracts are also tied to oil prices so there is also downward pressure on the cost of gas used for heating and generating electrcity.

But low prices are disastrous for the North Sea offshore oil industry, which needs higher costs to compete for investment against much lower cost-producing regions such as the Middle East. Thousands of jobs have been lost in Aberdeen since the slump began in July 2014.



At the heart of the current turmoil is a decision by Saudi Arabia and other leading voices in the Opec oil cartel to get drawn into a turf war with the new generation of US shale producers.

By keeping output targets high, the Saudis hope to drive the US shale drillers out of business. But the latest figures released last night by the US Department of Energy showed production rising by 17,000 barrels a day over the past seven days, the fourth consecutive week of increases.



Prices of Brent on the global market sank to $32.16 before recovering slightly to $33.57, still 2% down on the day.