The price of oil fell to its lowest level for 11 years yesterday as the world’s biggest producers fuelled a global supply glut in a war for market share. 

Brent crude sank to $36.04 a barrel – even lower than during the financial crisis – to levels not seen July 2004, with analysts warning that prices could fall even lower still in 2016.

Oil futures haven fallen more than 18 per cent so far this month in the steepest decline since the collapse of Lehman Brothers in September 2008. City experts said more falls were likely in 2016 as supply outpaces demand, while the International Energy Agency said that Iranian crude oil exports could rise by half a million barrels a day within a year once sanctions are lifted. 

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Output from war-torn Libya is also recovering, while the Opec cartel in effect abandoned production limits this month to take on US shale producers, whom analysts say are weathering the Opec assault better than previously thought. 

US crude stockpiles have reached nearly 500 million barrels, and the nation – which overtook Russia as the world’s biggest oil and gas producer this year – also scrapped a 40-year ban on crude exports last week, potentially pumping yet more oil into swollen global markets. 

A stronger dollar meanwhile is pushing down the price following last week’s US Federal Reserve interest rate rise. Barclays said there was “further downside risk to prices” in a note, while Morgan Stanley said the market could suffer “serious setbacks” as US producers were “more resilient” than expected.  

 

The cost of oil stood at $114 a barrel just 18 months ago.

While painful for oil-producing nations and companies focused on North Sea production – where thousands of jobs have been shed – the tumbling cost of oil is good news for consumers in the UK.

According to the RAC, the average price of petrol is 102.06p a litre – the lowest since August 2009. Supermarkets, which account for 16 per cent of the UK’s forecourts but more than 40 per cent of sales, are widely selling petrol below the £1-a-litre mark, in a boost to the 19 million owners of petrol vehicles. The average price of petrol across the UK overall has not dipped below £1 since May 2009.

The supply glut has meanwhile put a premium on storage. The privately owned operator Greenergy will open its Thames Oilport terminal in the Thames estuary on the site of the former Coryton refinery.

The Oilport will eventually become the UK’s largest oil products terminal, according to Greenergy’s chief executive, Andrew Owens.

The collapse in oil prices over the past 18 months has made storage a highly lucrative business as traders and refiners opt to store crude and oil products until prices recover.

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