Breitling Oil and Gas Morning Podcast #106 July 6th, 2012

As oil prices drop to below $90 a barrel this week, reaching a seven-month low, it’s fine to take heart in the accompanying dip in gas prices at the pump, but this is all relative in the larger picture of economic slowdown and possible recession.

 
 

Last week closed with benchmark US crude at $90.86 per barrel and $106.83 per barrel for Brent crude, the lowest levels so far in 2012, and prices continued to fall this week, dropping to below $90 for the first time since the last quarter of 2011.

Weaker demand, stronger supply, signs of slowing US and Chinese economies and a temporary cessation of simmering tensions over Iran have worked to lower prices. The possibility, and indeed probability, of a recession across the European Union is likely to drive prices down further. Prices have also lowered as a result of the strengthening of the US dollar.

In the meantime, the Saudis continue to exert downward pressure on prices, not satisfied with the fact that oil has fallen by $15 a barrel over the past month alone.

The trend is welcome at the pump in the US, where prices have fallen by 27 cents per gallon since early April. This, of course, ignores the drivers pushing oil prices down—drivers that some warn could lead to a recession in the US.

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