Oil price edges higher but fears of global economic slowdown loom

'It seems to have been driven by a wider impending sense of doom amidst weak equities, geopolitics, subsequent softening demand and increasing supply,'

The decline of more than 20 per cent has been promoted by weaker global demand alongside increased output in Saudi Arabia and the US (Getty)

Oil prices edged higher on Monday after a rout that has seen Brent crude crash from $85.79 (£67) a barrel in early October to below $60 this week.

The decline of more than 20 per cent has resulted from weaker global demand alongside increased output in Saudi Arabia and the US.

Donald Trump last week hailed the fall as a “big tax cut for America and the world” adding: “Thank you to Saudi Arabia, but let’s get lower.”

Saudi oil production surged to an all-time high of 11.1-11.3 million barrels per day in November while the rising dollar has hurt emerging economies, reducing demand.

Prices rose ahead of the implementation of US sanctions on Iran last month but higher borrowing costs and the increasing threat posed by US-China trade tensions have helped to push oil lower in recent weeks.

BP Middle East President Michael Townshend said a further fall to below $50 was “within reach”.

That would be good news for motorists filling up their cars but signals concerns in the global economy.

The Organisation for Petroleum Exporting Countries (Opec) meets in Vienna on 6 December with Saudi Arabia widely expected to push for production to be cut by up to 1.4 million bpd.

However, Mr Trump has been pressuring Saudi Arabia for no cuts at all. The US president's backing is seen as key for the Middle Eastern kingdom as it seeks to avoid sanctions over the murder of journalist Jamal Khassoggi.

Jack Allardyce, oil and gas research analyst at Cantor Fitzgerald Europe said there was no obvious catalyst for the recent slump.

“It seems to have been driven by a wider impending sense of doom amidst weak equities, geopolitics, subsequent softening demand and increasing supply,” he said.

“A lot depends on both the result of US-Sino talks at the G20 this week, and Opec and it’s allies’ meeting on the 6th – it looks as though the market has already decided that the mooted 1.4 million barrels of oil per day cut to output isn’t enough to offset the decline in demand growth projections, so if that is the number then the current level could remain into the new year (or we might see some more weakness).

“If they opt to make deeper cuts – which seems unlikely given how much the US is leaning on the Saudi’s and Russia’s apparent lack of enthusiasm – then some sort of recovery is likely. As ever, benchmarks seem to move more dramatically than they really should given underlying fundamentals.”