16 March 2009 | Martha McKenzie-Minifie
The price of oil dropped by about 5 per cent this morning after the Organisation of the Petroleum Exporting Countries (Opec) decided yesterday not to cut production.
At a meeting in Austria, Opec opted to keep production steady in a bid to stabilise the market.
The economic downturn has sent the price of oil tumbling by 75 per cent from its peak in July, to finish last year at just over $35 (£24.64) a barrel.
Opec's March Monthly Oil Market report, released last Friday, found the crude oil basket price dropped 17 cents (12p) to an average of $41.35 (£29.11) in February.
In the report, Opec credited measures by governments to stimulate their economies as well as its own effort to reduce the supply overhang by stabilising the market. It said there was a likelihood of renewed pressure on prices because of continued economic deterioration, demand erosion and the impending "low demand" season.
In addition, world demand for oil was expected to decline for the second consecutive year, said the report: "The spillover of the financial crisis into the real economy is now affecting both the developed and developing countries, implying that the impacts on oil demand in 2009 will be felt not only in OECD but worldwide."
Opec will meet again in May to reassess the situation.