NS: Oil stays under pressure as Iran orders sharp rise in crude output
Whatever the eventual impact of additional Iranian barrels on the market, many energy specialists predict low fuel prices will continue throughout the year, benefiting many consumers in countries like the United States and Japan that still import a lot of oil.
“I think that at least the biggest fears about the real economy, fears that came to the surface during the stock market rout…I think those biggest fears were overblown”, said Louis Kuijs, head of Asia economics at Oxford Economics in Hong Kong.
But the market then found support, rebounding above $29 on bargain-hunting and as Opec said it expects a “rebalancing process” to begin in 2016.
The oversupply is set to worsen with the return of Iranian barrels to the market following the lifting of nuclear-related Western sanctions.
Brent oil dipped below $28 a barrel and traded around its weakest level since the end of 2003 after the lifting of sanctions on Iran paved the way for an increase in oil output amid a global glut in the commodity.
Goldman Sachs said that Iran’s production would rise by 285,000 barrels per day (bpd) year-on-year in 2016 while BMI Research said the rise would by 400,000 bpd.
The falling oil price is also worrying global chief executives, who are more pessimistic about growth than this time previous year, according to a survey.
Iran, in principle, may now sell oil to its former customers in Europe and elsewhere. The projected drop of 600,000 barrels a day in non-OPEC production this year will be the steepest since 1992. But in practice, Tehran may face obstacles in the form of continued restrictions on use of the dollar because of some US sanctions that remain in effect. The dollar is widely used for oil trading. On Saturday, Iran’s OPEC representative Mehdi Asali said the country would not hesitate to ramp up production, appearing to contradict comments from other senior Iranian oil officials that Iran would not flood the market at a time of global oversupply. And those differences have grown only more acute as low prices have split OPEC and as tensions have grown more heated between the Saudis and the Iranians over sectarian conflicts in places such as Yemen and Syria. That would still be less than its estimate for what Iraq now produces.
“The outlook for the oil market is pretty negative at the moment”, Angus Nicholson, an analyst at IG Ltd in Melbourne, said by phone.
The Shanghai Composite Index rose 0.4 percent amid evidence of a recovery in Chinese house prices and as speculation grew equities had been oversold after the benchmark gauge capped a drop of more than 20 percent from its most recent high last week, the common definition of a bear market.
