A rift between Saudi Arabia and Iran over the Saudi execution of a Shi’ite cleric failed to boost prices this week, as it appeared to put an end to speculation that OPEC members could agree on production cuts to lift prices.
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The oil market largely shrugged off rising political tensions in the Middle East. On Tuesday Kuwait recalled its ambassador to Iran after attacks on Saudi missions by Iranian protesters, state news agency KUNA reported.
Crude oil futures recovered 0.47 per cent to Rs 2,366 per barrel today as speculators enlarged positions after it rebounded from 12-year lows in Asian.
In early trading on Monday, US light oil West Texas Intermediate (WTI) for delivery in February rose by about 2 percent to $37.81 (34.62 euros) a barrel.
While the price of crude surged briefly over tension between Saudi Arabia and Iran, Enpro’s Roger McKnight said that in the long run, the two countries are both likely to keep the taps open.
Iran wants to regain some oil exports that it lost while under economic sanctions, soon to be lifted, for its nuclear program.
Concerns about the economy in China, the world’s second-largest oil consumer, were worsened by news that national rail freight volumes logged their biggest ever annual decline in 2015.
Elsewhere in the energy complex, natural gas for February fell 0.2% to $2.32 per million British thermal unit, while gasoline for the same month sank 3.6% to $1.21 a gallon. Iran plans to raise oil output by half a million to 1 million bpd post sanctions, although Iranian officials said over the weekend they did not plan to flood the market with its crude if there was no demand for it.
Also feeding into the overall weak market sentiment, a survey showed that China’s services sector expanded at its slowest pace in 17 months in December, following on from weak factory data on Monday which also knocked markets globally.
The global oil market has suffered a calamitous start to 2016, tumbling also in response to a vast supply glut that has plagued prices in recent years.
Analysts were not unanimous over whether lower prices would force the Organization of the Petroleum Exporting Countries (Opec) to cut production.
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Brent crude dropped from more than $100 a barrel in June 2014 to trade at about $37 Tuesday after OPEC ramped up output amid swelling shale oil supplies from the US. According to the newspaper, the global oversupply of crude oil is one of the main reasons for the decreasing oil prices.
