Increased Iranian oil output should feed into oversupply this year with the expected lifting of Western sanctions on that country’s exports, the US Energy Information Administration said.
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Even before sanctions are lifted, Iran’s oil exports were on target to hit a nine-month high in January, with 1.10 million barrels a day of crude, excluding condensate, to load. Analysts at the bank said they now assume that Iran will produce nearly 700,000 barrels a day more in the fourth quarter of 2016 than over the same period in 2015.
Brent, the Global oil marker, fell to a new 12-year low of $29.46, while the U.S. benchmark West Texas Intermediate dropped to $29.41 on Friday.
While Iran trades limited amounts of fuel with Asian buyers legitimately, its crude oil exports have fallen to just over 1 million bpd, down from a peak of over 3 million bpd in 2011, owing to a ban on of European supply deals.
“How fast Iran can put oil back on the market will now be a key issue for oil markets, with many skeptical that it will be able to do this almost as fast as it has forecast”, he added.
The decline in prices came after the Chinese stock market Shanghai Composite Index declined 3.55 percent on Friday to 2,900.97 points. The yuan has weakened further.
Dour economic signs have inflamed fears about demand in China, the world’s second-biggest oil consumer. Brent crude, a benchmark for worldwide oils, gained 79 cents, or 2.6 percent, to $31.74 a barrel in London. A separate report from the Commerce Department indicated USA retail sales dipped last month. After worldwide sanctions against Iran are lifted, the flooding of oil market is likely to pull down the equity indices all over the world.
The relentless fall in prices is set to see oil finish the week at its lowest level in 12 years.
Investors should buy December 2016 WTI contracts below $40 a barrel as prices will move to $48 by the end of this year, Mark Keenan, head of commodities research for Asia at Societe Generale SA, said in a Bloomberg TV interview.
Any meeting that would take place would be to review OPEC’s position to see if there was any need to change its strategy, Kachikwu said, adding that the meeting could take place in February or March.
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Global markets are erring in their response to slumping oil prices by missing the upside of cheaper crude, according to US economist Barry Eichengreen.
