Oil prices fall to an 11-year low

Oil prices hit an 11-year low as the Brent crude oil price dipped 4.2% to US$34.88 per barrel. The current price is the lowest since July 2004. US crude also sank 3.3% to US34.77 per barrel.

Analysts say that the prices are affected by the tension between Saudi Arabia and Iran due to the execution of Shia cleric Sheikh Nimr al-Nimr. The increasing tension makes it more unlikely for Saudi Arabia to limit its supply to control oil prices.

“With relations between Opec kingpins Saudi Arabia and Iran at a historic low point, it solidifies an already unlikely scenario that Opec might cut output,” said Barclays analyst Alia Moubayed to the BBC.

Prices have slumped by 70% since 2014 due to oversupply and decreasing demand in China and Europe.

According to the BBC, Goldman Sachs has warned that oil prices could go as low a $20 a barrel, but most analysts are expecting the price to stabilise in the second half of the year as supply from non-Opec nations slows and demand remains relatively robust.