Investors believe that the return of Iran to the global oil market will not have an impact anytime soon because Iran will require investment and time to modernize of their outdated oil complexes.
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“Major producers are now delivering 2-2.5 million barrels per day more than demand, so the question is how long they can continue to overproduce for at that level”, he said, speaking at the Asia Financial Forum in Hong Kong.
BMI Research said the strong dollar will also help push down prices of commodities, including oil.
It doesn’t look like 2016 is going to the year the oil supply glut improves, according to the International Energy Agency.
In late afternoon deals, United States benchmark West Texas Intermediate (WTI) for February delivery tanked to US$26.30 per barrel, a level last seen in early May 2003.
Brent crudeoil prices rebounded about 3 per cent on Tuesday from 12-years lows after data showed Chinese oil demand likely hit a record high in 2015, but the recovery was not expected to last amid warnings that the market would stay oversupplied this year.
Global oil markets could “drown in oversupply”, pushing prices even lower, warned the International Energy Agency (IEA) on Tuesday in its monthly Oil Market Report, Kallanish Energy learns. “There are considerable uncertainties around the quality and quantity of oil that Iran can offer to the market in the short term and the not inconsiderable challenge of finding buyers willing to take more oil into an already glutted market”, the IEA argues.
“The drop was due to the Western sanctions on Iran being lifted”.
Crude prices have fallen around 27 percent since the beginning of this year and around a 77 percent decline since reaching $115 per barrel in June 2014.
Brent is down about 22 percent from the start of the year, in addition to the nearly 35-percent plunge it suffered in 2015.
He said weaker demand in the Middle East, which has been hit by lower oil prices, could add fuel to the sell-off and there was little to stop crude falling to $20 per barrel.
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Crude oil and other liquid fuels from this increased production are likely to be sold in export markets. He added that a “very broad-based sell-off across assets and across the world” would amplify pressure on oil prices.
