Oil prices dropped again this morning, continuing a near month-long slide.
This time it was the plunge in world stock markets that dragged down the price of crude, stoking fears of an economic downturn that would cut energy demand.
, a benchmark used in international contracts, was 0.55% lower at $75.75 a barrel, while (WTI) was down by the same percentage, at $66.45 a barrel.
Since 25 September, Brent has gone from $81.87 a barrel to a peak of $86.29 on 3 October, to $76.17 on 24 October. WTI prices have followed a similar pattern, from $72.78 on 25 September to $76.41 on 3 October and $66.82 on 24 October.
Oil’s woes have been blamed on various causes during the past month. The first factor in the frame was the trade war rhetoric of President Donald Trump and fears that tariff barriers, and other obstacles to world commerce, could tip the global economy into recession.
But the early October price rally seemed to put that issue to one side as traders’ attention switched to suggestions of a supply shortage. Reduced output from Iran and rapidly declining production in Venezuela, it was thought, would bolster the price.
Support factors kicked away
Members of the 15-country Organisation of Petroleum Exporting Countries (OPEC) and their allies in the so-called NOPEC group, which includes Russia and Oman, would not be able, it was thought, to make up the shortfall. Expectations of shortages were heightened by the controversy over the killing of Saudi journalist Jamal Khashoggi in the country’s consulate in Istanbul.
But these supports for the oil price were kicked away as Saudi Arabia both denied it would use the “oil weapon” and insisted it would be able to meet any extra demand without difficulty.
Ghosts of crashes past
As the price started to drift off, the stock-market plunge piled on the pressure. The technical explanation for the price falls is rooted in worries among traders and investors about corporate profits and the slowdown in global economic growth with, again, fears of a trade war playing their part.
The US economy, which has boomed since the inauguration of President Trump in January 2017, is another focus of anxiety given the sharp decline in the number of new homes being sold. Political uncertainty ahead of mid-term Congressional elections also played a part.
Furthermore, a longer-term perspective is likely to prompt fears that the nine-year bull market on Wall Street is overdue for correction.
But behind these rational concerns may well lie a deeper sense that October is historically fraught with danger for stock markets, as seen in the 1929 Wall Street Crash and Black Monday in 1987, and that the past may well be repeating itself.