TheCable

Brent crude oil prices fell below $50 a barrel on Wednesday, the lowest in five years.

Although prices later went above $50, the US futures were down around 75 cents to under $47.20 a barrel, their lowest since April 2009, after already completing the drop below $50 earlier in the week.

The falling crude oil price is believed to be dictated by easing of global business and the reluctance of the Organisation of Petroleum Exporting Countries (OPEC) to cut oil production and increased oil production output and weak demand.

Additionally, the low prices are a result of high output clashing with sluggish demand, especially in Europe, which is still struggling with debt crisis; and in Asia, where China’s growth is slowing and Japan is battling recession.

Oil markets had slumped for a fourth straight session on Tuesday, as mounting worries about the supply glut pressured crude prices, which have fallen almost 10 per cent this week.

“The risks to oil prices remain skewed to the downside in the near term,” ANZ bank said in a note on Wednesday.

“While we expect high-cost shale producers to be the first to cut production, this is unlikely to occur until the middle of 2015,” it added.

Nobuyuki Nakahara, a former oil executive and ex-member of the Bank of Japan’s policy board, told Reuters he also expected further price falls.

“Oil prices are likely to keep falling due to slower Chinese growth and because the years of prices above $100 before the recent plunge were ‘abnormal’ historically,” he said.

“I would not be surprised if the price falls to as low as around $20… It is purely due to supply and demand.

“There is a ceiling for oil because high energy prices dampen economic growth.”