Energy analysts fear the oil price could continue to fall this year, unless global economic conditions start to turn around.
Ongoing uncertainty in the eurozone and slowing economies in India and China have dented demand for oil, leading to the cost of a barrel of Brent crude falling to 18-month lows.
The price has also been driven down by high supply from countries in the Opec export cartel, which is responsible for about one-third of global production.
Opec member and world’s biggest producer Saudi Arabia has boosted output to a 30-year high this year to help to tackle the worldwide economic slowdown, but it could be poised to reduce supply to the market.
Oil was around $125 a barrel as recently as April, but was trading at about $93 yesterday.
It has led to companies which rely heavily on fuel – such as airlines and hauliers – holding off on buying future supplies at current prices, which they also did in 2008 as prices collapsed from a record high of nearly $150 to just $40.
Andrew Reid, Aberdeen-based managing director of energy consultant Douglas-Westwood, does not expect a similar plunge in price, but added the International Energy Agency – which provides energy advice to the world’s most industrialised nations – had cut its forecast for oil demand. He said: “With less demand, this will impact on pricing and we may see volatility and downward pressure on prices.”
Mr Reid added it was hard to predict where prices would go in the short term, but feared worsening economic conditions in the second half of this year would also keep oil prices low.
Mr Reid said this was unlikely to affect oil and gas operators’ inve-stment plans in the North Sea and worldwide, adding: “Most oil and gas companies are medium to long-term planners and the general outlook for energy is strong. I would expect a number of high-quality projects to progress in spite of short-term volatility.”
Mr Reid said should oil and gas firms begin to reconsider investments because of a falling oil price, expensive operations such fracking – which involves fracturing rocks to force out underground resources – could be at risk of being put on hold.
He said: “In the event of a lot of downward pressure on commodity prices, you might expect unconventional reserves to be less economical and so there might be a reduction in that type of activity.”
Despite falling prices, political unrest in the Middle East could quickly reverse the trend.
Earlier this year, fears over oil supply from Iran led to prices rising to more than $125 a barrel as tensions between the country and the west mounted.
Events involving Iran could still lead the oil price back above $100, as exports from the country have fallen sharply this month. European Union and US sanctions have already cut the Middle Eastern country’s daily output by 600,000 barrels a day, and earlier this week EU governments formally approved an embargo on Iranian oil to start on Sunday. The embargo could take a further 400,000 barrels a day off Iran’s daily production.
Continuing uncertainty over Syria has also led to some recovery in the oil price.
Moira Lawrence, an audit partner at professional service firm Ernst and Young in Aberdeen, said prices were being held steady by the expectation that Saudi Arabia and its fellow Opec members would pull back from current levels of supply.