Caution urged over falling oil prices

Moody’s has warned that lower oil will not provide a “significant boost” to global growth.

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By :  ,  Financial Analyst

Ratings agency Moody's has urged for caution over the falling global oil prices.

The organisation said that these tumbling prices will fail to provide a "significant boost" to global growth in the next two years. It noted that any bump generated from cheaper oil would be hampered by ongoing economic problems in the eurozone and slowdowns in nations such as China, Japan and Russia.

Moody's explained in its 'Global Macro Outlook 2015-16' report, published on Wednesday (February 11th) that lower oil prices would be sustained throughout 2015. However, there should not be an expectation that this will provide any form of boost for many countries across the world.

Marie Diron, senior vice-president of credit policy at Moody's and author of the report, said: "Lower oil prices, which we expect to be sustained, would in principle provide a significant boost to global growth.

"However, we are maintaining our G20 forecast. For the G20 economies, we expect gross domestic product (GDP) growth of just under three per cent each year in 2015 and 2016, unchanged from 2014 and from our November 2014 Global Macro Outlook."

Opec in the spotlight

The tumbling oil prices has placed a significant focus on members of the Organization of Petroleum Exporting Countries (Opec). In November and December, the cartel of the biggest oil producing nations in the world have met to discuss whether or not to introduce a reduction in output to stimulate oil prices.

December's meeting saw Saudi Arabia's oil minister Al al-Naimi claim that Opec would not cut production even if oil prices dropped below $20 (£13) a barrel. Mr al-Naimi told the Middle East Economic Survey that the decision would be "irrelevant" when it came to price.

Members such as Saudi Arabia and the United Arab Emirates, along with non-member Russia, have long been opposed to the implementation of an output reduction.

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