Oil prices steadied on Thursday, but remained near 12-years low on the prospect of Iran unleashing its oil on an oversupplied market and with few signs of improving demand in a fragile global economy.
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Crude capped a second annual loss in 2015 as the Organisation of Petroleum Exporting Countries effectively abandoned production limits amid a global surplus.
Investment sentiment has weakened as worldwide sanctions against Tehran’s nuclear program could be lifted as soon as this weekend, which is likely to lead to a gush of Iranian oil exports.
Some oil experts said crude prices could fall as low as $20 a barrel before nations like Russian Federation which have been pumping oil at record rates stop drilling and selling so much crude, creating a glut on world markets. US crude futures were more than 4 percent lower at $29.75 per barrel at 0936 GMT, after posting the first significant gains for 2016 in the previous session. Oil minister Bijan Namdar Zanganeh has pledged to boost output by half a million barrels a day within weeks of the end of sanctions and by the same amount again in six months.
The Dow Jones Industrial Average was down more than 500 points in midday trading Friday, falling below 16,000, as oil prices sank below $30 a barrel.
“The Iran headline has a bigger impact on waterborne crudes”.
Crude prices have shed three-quarters of their value in 18 months and dropped under $30 this week for the first time for 12 years.
On Friday, the average price for a basket of OPEC crudes fell to $25 per barrel, even before unrestrained Iranian exports hit the market. Earlier they hit $29.28, the lowest since November 2003.
United States benchmark West Texas Intermediate (WTI) for February delivery plunged $1.67 to $29.53.
“What we ve seen, if anything, is a bit of a technical bounce”, said Bart Melek, head of commodity strategy at TD Securities. Some members of the group have continued these discussions but a deal would probably have to remove between 3 million and 4 million barrels per day from the market to be effective.
“Most of the bearishness is coming from worries over Iranian sanctions being lifted”, said Daniel Ang, an analyst with Phillip Futures.
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The EIA also cut its global oil demand forecast slightly to 95.19 million barrels a day this year, while raising its forecast for global production.
