The moves triggered a new bout of cost-cutting at supermarket forecourts in Britain with Asda and Morrisons unveiling plans to slice a further 2p per litre off petrol and diesel.
The price of Brent crude oil is now 50% lower than it was in June when commodity traders and analysts woke up to the fact that a combination of increased American fossil fuel production and weak global demand could produce an energy glut.
Brent was down by more than 3% at just under $56 at midday in the wake of moves by Barack Obama’s administration to loosen restrictions on exports.
The Department of Commerce in Washington said it had begun to approve requests to ship overseas processed light oil products after a long period of intense political debate.
Analysts said the move could lead to over 1m barrels of ultra-light US crude entering the global market, intensifying a battle with Saudi Arabia and Opec.
“In practice this long-awaited move can open up the floodgates to substantial increases in exports by end 2015,” said Ed Morse, global head of commodities research at Citigroup bank.
The latest decline in the crude price was accelerated by new data from China showing that its factory sector shrank for the first time in seven months in December.
The final HSBC/Markit Purchasing Managers’ Index (PMI) for this month came in at 49.6, down from 50.0 in November – with any reading lower than 50 indicating a contraction. “Clearly, demand concerns are one of the issues for the oil market,” Michael McCarthy, chief market strategist at CMC Markets, told Reuters. China is the world’s second-largest oil consumer and any contraction in its factory sector can have a major impact on demand.
The fall in energy prices should help countries which are heavily dependent on oil imports but they will have a mixed impact on Britain. The UK has an important North Sea industry but still imports half its needs.
Asda said its pump price reductions would mean motorists would be charged no more than 107.7p a litre for petrol, with diesel at 114.7p a litre. This is the 13th cut in prices by the supermarket since the end of September and in total it takes 19p a litre off petrol and 15p a litre off diesel. For Morrisons, it is the sixth cut since the beginning of December.
The AA motoring organisation said these moves would have a positive impact on the wider economy although it cautioned against predicting further falls.
“The UK average price for petrol is currently around 113p per litre and these welcome decisions on making further price cuts will eventually filter down in some form to other retailers,” it said in a statement.
“So the UK average price will fall further as we enter 2015. However, just how far it falls is anyone’s bet. Current indications are that the magical £1-per-litre average price across the UK is still looking unlikely in the short term,” it added.
But the damaging flipside of a low oil price was provided by a now besieged North Sea oil and gas industry, which said the price slump was causing major problems. The oil and gas industry supports an estimated 450,000 jobs in the UK and is particularly important to Scotland’s economy.
Mike Tholen, economic director at the Oil & Gas UK lobby group, told the BBC: “We are already seeing, even at $60 a barrel, that about 10% of our production could be at risk if we see low prices continue.
“Inevitably there will be downward pressure on employment. I’m afraid people will lose their jobs at low prices – that is a tragedy and I will be working very closely with the government to try and mitigate.”
Shell, BP and other oil companies have already started to cut jobs. In the US one of the first projects to export liquefied natural gas (LNG) to the rest of the world has been put on hold.
Excelerate Energy, which also operates a gas plant in the north-east of England, has postponed a scheme to build a floating export terminal at Lavaca Bay, Texas – at least until April. There are now fears that a host of other LNG export facilities, designed to ship US shale gas abroad including to the UK, will also be shelved.
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