The slippery slide of oil prices

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The fall in the price of oil is having some curious side effects

A (Brent) Crude Fall
A graph, source: DigitalLook.com
Source: DigitalLook.com

Petrol and diesel at the pumps fell to under a £1 a litre in January as the supermarkets battled for customers. The drop was due to the precipitous decline in the price of oil, which started in mid-2014, from over $100 a barrel, and took another step down in late 2015, to $30 territory. It might feel like good news, but the falling price has not been beneficial for everybody:

The deferral of new exploration and production prompted by the current depressed price could lead to a shortfall in supply – and corresponding price recovery – relatively quickly. Good news for oil, gas and energy companies, and those closely linked to these resources. On the other hand, cheap oil is giving a boost to consumers now, in much the same way as a tax cut. Good news for retailers and manufacturers.

Both views offer opportunities for active investment managers to exploit.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.

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