Oil drops briefly below US$40
A barrel of US crude oil fell below US$40 per barrel for the first time since the end of the global economic crisis.
Friday's fall, to US$39.86, was just the latest indicator of a vast shift in the energy landscape over the past year. The price bounced back a bit to close down 87 cents at US$40.45, the lowest close since March 3, 2009.
The price of oil has fallen for eight consecutive weeks, the longest streak since 1986. Oil is down 34 per cent from its high of US$61.43 this year, and 62 per cent from its high of US$107.26 last year.
Brent crude, which is used to price international oils, fell US$1.07 to US$45.55 in London on Friday.
A boom in production has outpaced growth in global oil demand. The United States is churning out oil at a rate not seen in decades. Meanwhile, even with sharply lower prices, Saudi Arabia and other OPEC nations haven't cut production.
Production in the US averaged 9.4 million barrels in the four weeks ending August 14, up nearly 11 per cent from a year ago, according to data released this week by the Energy Department.
US oil held in storage has reached levels not seen in at least 80 years. Meanwhile, OPEC production averaged 31.5 million barrels a day in July, a three-year high.
Adding to the downward pressure on oil prices is a steady drumbeat of economic data out of China suggesting that the world's second-largest economy is slowing. Data released Friday showed a further contraction in China's manufacturing sector and it sent ripples through global stock markets.
The world's biggest oil producers are getting hit by falling prices and pessimism about China and other economies that have not recovered from the recession like the US has.
Almost all oil companies, from Exxon Mobil to BP Plc, have cut spending on exploration in anticipation of a prolonged period of lower prices.