Petrol will soon cost less than bottled water as the relentless decline in oil prices sends fuel down to 86p a litre, it has been claimed.
Brent crude fell to below $30 a barrel for the first time since 2004 on Wednesday evening – and has fallen by more than 73pc since reaching highs of $115 last summer.
Motoring group RAC said pump prices now could fall back to levels last seen in the aftermath of the financial crisis in 2009, if the commodity plunges to as low as $10, a forecast made by Standard Chartered Bank earlier this week.
At 86p, petrol would be cheaper than most supermarket varieties of bottled water, said Simon Williams, spokesman for RAC.
“Motorists can expect some really low fuel prices in 2016,” said Mr Williams.
Oil could crash to $10 a barrel, warn investment bank bears.
Unleaded petrol has fallen below £1 per litre for the first time since 2009, with diesel also falling below the same level last week. Average prices across the UK remain at 102.5ppl for petrol and 103.2ppl for diesel.
RAC’s 89p forecast is contingent on the pound not weakening further against the dollar after falling to a five-year low this week. Drivers would still be paying fuel duty of 84pc even at $10, said the motoring group.
Oil sold off in a volatile day of trading which saw prices climb as high $31.92, before slumping in the wake of new figures suggesting the world’s supply glut will persist until 2017.
Brent crude dropped to $29.96 in intraday trading after prices temporarily rallied on the news that Russia could pull back on its record levels of production.
Russian oil output hit a post-Soviet era high in 2015, according to the International Energy Agency. Saudi Arabia has urged Moscow – which is not a member of Opec – to pare back on production to help re-balance the world’s oversupplied market.
“The current oil prices may lead to quite hard and fast closures of certain oil producers in coming months,” said deputy Russian finance minister Maxis Oreshkin, in a tentative sign that doggedly low prices were beginning to hurt the country.
You would literally need to have Putin in Riyadh or King Salman in Moscow for any indication that this is anything more than rhetoric.
But the prospect of a Saudi-Russian entente was overshadowed by the news that global supplies grew by another 200,000 barrels to 482.6m last week.
The US Energy Information Administration said its gasoline stockpiles grew by another 8.4m barrels in the week to January 8, higher than analyst expectations of 1.6m.
“US crude oil inventories remain near levels not seen for this time of year in at least the last 80 years,” said the EIA, who expect inventory growth to continue for the next two years.
West Texas Intermediate lost 1.2pc to $30.10 on the release.
Analysts said prices would fall further as worries about the state of the global economy and oversupply overwhelmed the market.
The collapse in oil prices has been driven by Opec’s decision to maintain record production in the face of dwindling demand.
The cartel – which controls a third of the world’s supply – has failed to agree on a formal production target after being riven by conflict between Saudi Arabia and Iran. Facing stalemate, Opec has also called on producers outside the cartel to step back and help stabilise prices.
But Opec’s dysfunction meant traders would continue to assume the body had lost control over the world’s supply.
“You would literally need to have Vladimir Putin in Riyadh or Prince Salman in Moscow and see the formal handshake for any indication that this is anything more than rhetoric,” said Helima Croft at RBC.
“We need an explicit plan [on production cuts] for people to get excited,” she said.
The sell-off has also been driven by the prospect of Iran returning to global markets after the lifting of western-imposed sanctions, which could be complete as early as next week.
Iran has remained impervious to Saudi calls to limit production, insisting that it will add an additional 500,000 barrels a day to global markets within weeks of sanctions being lifted.
Around $400bn of spending on new oil and gas projects has been delayed or cancelled in the wake of the oil price crash, said consultancy Wood Mackenzie.
