Crude Oil Futures Drop as Weak Outlook Prevails and Demand Slows

“The oil prices in the next year (2016) will fluctuate between $35 to $50, so Iran is not anxious about a fall of its oil income”, Mehdi Asali was quoted as saying by the oil ministry’s news agency, SHANA on Wednesday.

The swift action to cut subsidies was unexpected, even if there had been no doubt Saudi Arabia would post a deficit this year as oil prices have dropped below $40 a barrel since mid-2014.

Benchmark Brent, near $37 per barrel, traded just $1 away from those lows reached last week as the primary supportive factor – an expected cold snap in Europe and the United States – was forecast to be short-lived. Brent futures were down 47c, or 1.24%, to $37.32 a barrel. All 10 major S&P sectors ended with gains, led by a 1.34-percent rise in the technology sector .splrct , which lifted the S&P 500 .spx to a modest increase for the year.

“We’re seeing thin volumes at year-end as the number of active participants has decreased due to the holidays”, said Martin King, co-managing director at Tyton Capital Advisors. Iran’s priority is to boost crude shipments to pre-sanction levels, state-backed IRNA reported, citing Oil Minister Bijan Namdar Zanganeh.

WTI CLc1 finished the session down $1.27, or 3.4 percent, at $36.60. They slid more in the NY session, as some traders reckoned the two-day pre-Christmas rebound, where crude rose about $US2 ($F4.26) a barrel, had been overdone.

Higher US Treasury yields underpinned the US dollar.

Oil analysts JBC Energy said that refined oil “product demand growth in Europe turned negative in October (-170,000 barrels per day year-on-year)” for the first time in 10 months and that diesel and gasoline demand growth in China, one of the strongest price supporters of the past year, was also slowing. It is up 8.8% for the year, though down almost 2% for the month as investors pare their dollar-long positions after the US Federal Reserve’s widely anticipated interest rate increase earlier in December.

The MSCI All World Index dipped 0.6 per cent.

Global oil benchmark Brent and USA crude’s West Texas Intermediate (WTI) futures settled up more than $1 a barrel, after weather forecasts showed the United States may get some cold winter temperatures following an unusually balmy autumn.

The dollar slipped against the euro and yen on Wednesday as another retreat in oil prices hit sentiment.

Stockpiles rose by 2.6 million barrels to 487.4 million barrels in the week ending December 25, instead of the 2.5-million-barrel fall expected by analysts surveyed by Bloomberg News.