Brent crude oil has fallen to a 5-1/2-year low below $57 a barrel as a global supply glut outweighed concerns of lost supply from Libya where battling militias have closed ports. As David Pollard reports the drop also hurt European shares.
They're the kind of pictures that - once - would have sent oil prices surging. Storage tanks ablaze on Christmas Day as rival factions in Libya fight over Es Sider, its biggest export terminal. Evoking a strong warning from the Libyan oil minister a few days later. (SOUNDBITE) (Arabic) LIBYAN FOREIGN MINISTER MOHAMED AL DAIRI, SAYING: "As Libyans we fear for ourselves as well as for the Arab nations around us and the international community if extremist terrorist organisations reach the oil wells and the revenues that come with them." Libya has Africa's largest oil reserves. The struggle for their control has cut Libyan production to less than a quarter of what it was before its civil war. But markets in Europe and elsewhere simply shrugged off the latest news. Brent crude prices continued their slide to under 57 dollars -a five and half year low - before recovering slightly. Global oversupply is the main pressure - in large part thanks to the US shale industry. But that's aggravated by slower global growth. And OPEC's decision's in November not to cut output. There's no sign of any change of heart, says IG market analyst, Alastair McCaig. (SOUNDBITE) (English) ALASTAIR MCCAIG, MARKET ANALYST, IG, SAYING: ''Every single soundbite that we've heard in the last couple of weeks from OPEC oil ministers in the Middle East have very much been along the lines that supply, certainly from Saudi Arabia, will be maintained. If demand picks up, Saudi Arabia will feel confident that they will be able to meet any excess demand that might materialise and it doesn't give any cause for an instant bounce as far as the spot prices is concerned.'' But the price bulls have one hope. (SOUNDBITE) (English) ALASTAIR MCCAIG, MARKET ANALYST, IG, SAYING: ''I guess the one issue that hasn't really panned out, of course, has been the, relatively speaking, mild weather conditions that the European arena has seen over the last quarter and if we were to finally see a bit of a cold snap that might start to tilt the balance as far as demand is concerned.'' Spain too has a new five and half year record of its own. Latest inflation numbers show prices there falling at their fastest rate since mid 2009 - mostly as a result of cheaper fuel. That's good for consumers - not so good for the European Central Bank, for whom deflation is almost certain to be 2015's number one challenge.