Oil prices fall to lowest in eight months

Monday October 06 2008, Graeme Wearden, guardian.co.uk

Oil fell to its lowest level in eight months today, offering drivers and companies the hope of lower petrol prices in the weeks ahead.

The price of a barrel of US crude oil dropped to $89.38 in morning trading, a fall of $4. This followed sharp falls on world stockmarkets, reflecting concerns that demand for energy will drop as the global economy slows.

This is the first time since mid-February that a barrel of US crude has cost less than $90, and almost a year since it first broke through this level.

London Brent crude also fell this morning, losing almost $3.50 to $86.87.

For most of 2008 oil has been well over $100 a barrel, causing pain at the pumps where petrol now costs well over £1 a litre.

A litre of unleaded petrol currently costs an average of 109.9p in the UK, with diesel costing 121.5p a litre, according to www.petrolprices.com.

Typically it costs around six weeks for changes in the oil price to feed through to the consumers, but there are already signs that prices are falling. On Friday Asda and Morrisons both cut their fuel prices, with a litre of unleaded now costing 105.9p at Asda, and 106.6p at Morrisons.

Merrill Lynch analysts predicted last that the price of oil could sink to $50 a barrel next year, if the economic slowdown deepens into a recession.

However, oil-producing cartel Opec may cut production to stem falling prices. Last month, as oil slipped below the symbolic $100 a barrel mark, it reversed earlier plans to boost output.

Graeme Wearden