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Uncertainty clouds markets

Oil price may fall to $43 a barrel says bank

Oil prices continued to tumble today, hitting a five-year low and amid speculation that it could fall to $43 a barrel by early next year.

Brent crude fell $2 today and was trading at just above $67, a level last reached in October 2009, and pressure was mounting on the oil producing nations represented by Opec to cut production.

Opec decided against a cut at last month’s meeting, but the decision was finely balanced. With prices falling 40% since June there is a renewed call to act.

US investment  bank Morgan Stanley believes Brent will average $70 a barrel next year and could rise to $88 a barrel in 2016.

But it is also saying it could plunge as low as $43 a barrel by the second quarter of next year.

“Without OPEC intervention, markets risk becoming unbalanced, with peak oversupply likely in the second quarter of 2015,” Morgan Stanley analyst Adam Longson said.

The uncertain price is having an effect on stock markets and currencies and prompted last week’s action by the UK government to cut the taxes on exploration and production to help maintain activity.

There is speculation that Russia will need to increase its interest rates to avoid falling into recession and to counter the impact of Western sanctions because of its military intervention in Ukraine.

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