The price of a barrel of Brent Crude has fallen below $28 for the first time in around 12 years, as the price briefly hit $27.67 on the morning of Monday 18th January 2016, before recovering slightly.
The price drop has been put down to the recent lifting of sanctions on Iran which are likely to cause an increase in the supply of oil globally, in an already saturated market.
An apparent oversupply of oil has led to the price of Brent Crude falling by around 70% since 2014, but the 18th January price is the lowest since around 2003/04, and a far cry from the 2008 price, which spiked at around $140 a barrel.
The issue may be exacerbated by behaviour of oil-rich Saudi Arabia, who are looking to put through an IPO of a significant chunk of state-owned Saudi Arabian Oil Co (“Saudi Aramco”), in a move many are describing as a “fire sale”.
Saudi Aramco produces more than 10% of the world’s crude oil.
Opec has been unable to restrict the supply of oil in recent years due in no small part to the influence of Saudi Arabia, who have been unwilling to reduce supply.
This latest slump in Brent Crude prices may well lead to more pressure to restrict supply, and could explain why the removal of restrictions on Iran have not proved universally popular.
