Standard Chartered has warned the oil price could plunge to $10 a barrel amid fears of a further devaluation of China’s currency.
The bank is the latest institution to throw its hat in the ring and caution that it believes oil prices are set to drop even further. Yesterday, Morgan Stanley said it believes prices could reach $20 a barrel in 2016.
“We think prices could fall as low as $10 before most of the money managers in the market conceded that matters had gone too far,” Standard Chartered said, according to a report in The Times.
As of 12 January, WTI Crude was trading at $30.44 a barrel, after dropping 3 per cent on the day, while Brent Crude slipped more than 2 per cent to hit $30.86.
On Wednesday prices edges slightly higher to sit at $31.21 and $31.64, respectively.
The price of oil has already fallen by more than 70 per cent since June 2014 and the rout has taken its toll on the oil majors.
This week BP announced plans to slash 4,000 jobs, representing around 5 per cent of its 80,000 workforce, including 600 in the North Sea.
Yesterday Morgan Stanley analyst Adam Longson warned moves in China to devalue its currency could prompt another downward spiral for oil prices.
“If rapid devaluation occurs, a 15 per cent [China Yuan] depreciation alone could send oil into the $20s,” he said. “A rapid China devaluation scenario could lead to another round of commodity weakness and send oil into the $20s. $20-$25 oil price scenarios are possible simply due to currency.”
Nigeria has now reportedly called for an emergency meeting with Opec following the warning over the oil price’s potential to collapse even further.
The Times reports that Nigeria’s oil minister Emmanuel Ibe Kachikwu said several members of the 13-nation cartel want an emergency meeting in March.
“We did say that if [prices] hit $35, we will begin to look at an extraordinary meeting,” he said.