Oil drops to its lowest point since March as investors fear increased supply

Oil prices continued to fall, sliding to their lowest point in eight months this afternoon after markets were hit by increased supply from the US and a slowdown in global trade.

Brent crude, the international standard, dropped by five per cent to $63.38 a barrel (£49.43) this afternoon, extending on losses made earlier in the day.

David Madden, an analyst at CMC Markets, said: “Oil had endured a heavy day of selling as investors are worried about supply.

“US stockpiles are rising, the global economy is slowing, and there is a perception that future demand will be weak.

“To add to the mix, production from Libya has soared, and there is talk that production could be ramped up even further.”

Prices initially increased this morning as speculators anticipated a cut in production from the Opec group of oil-producing nations.

But a broad sell-off later in the day sent the cost of Brent spiralling down.

The drop comes after the International Energy Agency warned cuts to global supply could impact international markets.

IEA chief Fatih Birol yesterday called for producers to show common sense: “Currently markets are very well supplied but we should not forget that spare capacity in Saudi Arabia is very thin, therefore cutting the production significantly today by key oil producers may have some negative implications for the markets and further tightening the markets,” he said.

“My appeal to all producers and consumers across the world is to have common sense in these difficult days.”