So, when Iran starts exporting oil, its revenue will have to pay for the low crude price.
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The Shenzhen Composite Index, which tracks stocks on China’s second exchange, slumped 6.66 percent, or 153.76 points, to 2,155.15. The slide in Chinese stocks and the yuan’s accelerated depreciation drove markets elsewhere in the region deep into the red.
Analysts estimate global crude production exceeds demand by anywhere between half a million and two million barrels daily.
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USA crude and Brent had both rallied about 3 percent in the previous session on hopes that a drop in temperatures would buoy demand for oil for heating purposes.
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Prices gained Thursday in light trading on uncertainty about Iran’s ability to increase its crude-oil exports next year.
Low oil prices are crushing Iraq’s finances when the country desperately needs income to fund its war against ISIS.
Also weighing on market sentiment was China as growth slowed in the economy of the world’s largest energy consumer.
Brent futures for the next month delivery were 47 cents lower or by 1.24 percent and were trailing $37.32 per barrel.
While noting that long-term predictions involving the oil sector are notoriously inaccurate, energy and environment journalist Nick Cunningham writes in the December 28 edition of OilPrice that marginal costs, which influence oil prices, have generally been increasing.
On Monday, leading OPEC producer Saudi Arabia announced plans for spending cuts and non-oil revenue raising methods to manage a record state budget deficit while state-owned oil firm Saudi Aramco pumps away.
Natural-gas futures for February were bouncing higher on Thursday, up 14 cents, or 5.4%, to $2.332 per million British thermal units.
Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland, called it “just another bearish data point in a series of many that have dominated 2015 and will likely continue to do so heading into 2016”.
The rise in U.S. oil production, which is generally seen as the biggest single factor that has led to the world oil glut, was curbed past year, albeit erratically.
Prices have particularly slumped since December 4 when the Organization of the Petroleum Exporting Countries decided against limiting production as members fight to keep market share.
In addition, BMO suggests that even at $30.00-$35.00, a range that’s close to current prices, the industry would find oil production unsustainable. “We’re still not seeing meaningful production cuts here in the U.S”. Its government has for years used the money it makes producing oil to pay for pensions, health care, social benefits and even to subsidize housing and grocery stores.
Iran has been widely expected to sell hundreds of thousands more barrels of crude oil next year as global sanctions are lifted as part of a nuclear deal.
At those low prices, Americans a year ago saved more than $115 billion on gasoline, or an average of $550 per driver, AAA said.
The glut may deepen as the worst flooding across the US Midwest in four years shut some oil pipelines and terminals near St. Louis.
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“The demand situation does not support a return to a higher price environment”, said derivatives exchange operator CME Group.
