Oil futures were trading at their lowest level in almost seven years on Monday, sliding below $35 per barrel. The drop was fueled by concerns about a surge in Iranian oil production as soon as next month. Moreover, once Iran’s claims materialize following the trade sanction lift, further weakness could be witnessed in the prices.
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Crude-oil futures have been facing severe headwinds since a year ago, when prices for the USA and global benchmarks shed more than half their value from the highs seen in June 2014.
“Until recently, oil exporters have benefited from high Brent prices to run current account surpluses, funding current account deficits in the rest of the world, essentially that of advanced economies”, Bouvier said in a note.
Oil prices are getting nearer from the 2008-09 crisis level of $33.98 per barrel as Iran is expected to export more oil as sanctions are lifted, beginning next year. According to a survey by Bloomberg, OPEC production in November rose to an above-target 32.1 million barrels per day.
New comments from Iran suggest the OPEC country is not willing to let the oil crash mess up those plans. While some are wary of Iran’s ability to ramp up crude oil production at a rate suggested by oil ministers, recent statements point towards the country being adamant on increasing production.
“OPEC keeps saying it would cut production if the non-OPEC players do the same”. The Saudis, longtime rivals of Iran, realize stronger prices would help boost Iran’s chances of an economic rebound.
US producers, meanwhile, are clinging to the hope that crude prices can eclipse the so-called “shale band” above $60 a barrel over the next year, allowing them to pump oil at a higher rate.
“Everything indicates that low oil prices are likely to dominate next year”. Individual stocks like Chesapeake Energy and Southwestern Energy have lost a stunning 80% of their value in 2015.
USA oil output has begun falling since it hit a 43-year peak in April 2015 of 9.6 million barrels per day, although the decline has been slower and shallower than many analysts expected, weighing on prices.
“Things are always darkest before dawn”.
“Gloom nourishes gloom”, said Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt.
“In view of the aforementioned, and emphasising its commitment to ensuring a long-term stable and balanced oil market for both producers and consumers, the conference agreed that member countries should continue to closely monitor developments in the coming months”.
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2 The five Straits Times Index Reserve List stocks that can replace a constituent of the STI are Suntec Reit, CapitaLand Commercial Trust, Singapore Post, Neptune Orient Lines and First Resources.
