Generally, Brent Crude is trading at a five and half year low due to fears over demand and over supply. OPEC, which provides 40% of the world’s supply decided to keep production unchanged despite the drop in price, leading to the price falling further.
On the 14th Dec Suhail Al-Mazrouei, UAE energy minister commented that OPEC will not cut production even if prices fall below $40 a barrel. Speaking to Bloomberg, he said “We will not change our minds because the price went to $60 or $40. We are not seeking a price, the market will stabilise by itself.
Moore Stephens, the accountancy firm confirmed that 18 firms in the UK oil and gas sector have become insolvent compared to only 6 in 2013. Jeremey Willmont of Moore Stephens commented, “The fall in the price of oil has translated to insolvencies in the sector quickly. The sector has enjoyed strong trading conditions for the last 15 years, so perhaps they haven’t been quite so well prepared for a sustained deterioration in trading conditions as other sectors would have been”.
She added, “Both BP and Shell have announced cuts to investment in a number of major projects. Smaller players are reconsidering their capital deployment. If this retrenchment continues the result will less work for energy companies”. According to energy consultancy, Wood Mackenzie, the fall in the price of oil jeopardises approvals of oil field developments.
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