A combination of factors have piled the pressure on oil prices in recent weeks, from concerns over the health of the world economy through to fears of prolonged military action in the Middle East and Ukraine and the global spread of the ebola virus.
These concerns have driven black gold prices to multi-year lows in recent days, and the Brent benchmark touched its cheapest since December 2010 at $87.74 per barrel at the start of the week.
But the eroding oil price has been rolling for months, however, thanks to fears over swathes of new capacity hitting the market in coming years, particularly on the back of accelerating US shale production. Indeed, the Brent price has shed almost a quarter from 2013s peak above $115 struck back in July.
City brokers expect a worsening supple/demand balance to keep prices underwater for some time, and Barclays said this week that it anticipates prices to average $96 per barrel next year, down from its previous projection of $107. And should the global economy continue to lose momentum then further downgrades can be expected.
BP continues to face an uphill battle to limit the financial consequences of the 2010 Deepwater Horizon oil spill. Late last month US judge Carl Barbier ruled that the company was guilty of gross negligence in relation to the spill, a decision which leaves BP open to a colossal $18bn penalty.
The firm has since appealed against the decision, claiming that the judgment was made using evidence which was not included during the trial. But given BPs poor record in the courts when appealing over what it is liable for, investors should not hold out for a favourable outcome.
The business has already set aside in excess of $42bn in provisions as compensation continues to rise, and the final bill is likely to continue steadily creeping higher as claimants come forward.
On top of this, BP is also being dragged to the UK High Court by a band of Colombian farmers who claim that the firm was negligent in the building of the Ocensa oil pipeline during the 1990s, the Financial Times reported this week.
Although the 18m the group is seeking for the subsequent damage to their land represents chicken feed compared with the cost of the Gulf of Mexico fiasco, the action represents another blow for BPs public relations team.
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Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.