Oil falls below $35 on rising stocks, fading hopes of export cuts

“There are rising stockpiles and the tension between Iran and Saudi Arabia makes any deal on production unlikely”, said Michael Hewson, chief market analyst at CMC Markets. Inventories probably increased by 500,000 barrels last week, according to a Bloomberg survey before Energy Information Administration data Wednesday.

Unless other producers such as Russia, Iran and Iraq agree to reduce their oil production, Saudi Arabia has consistently stated since the November 2014 OPEC meeting, it has no intention of cutting its supply to support oil prices.

It also comes amid a mounting crisis between Riyadh and Tehran, which has seen Saudi Arabia cut diplomatic ties with Iran after weekend attacks on its missions in the Islamic republic.

JPMorgan is forecasting global benchmark Brent at United States dollars 35 a barrel for the first quarter with a gradual recovery throughout 2016 to hit average over USD 50 a barrel for the full year.

The outlook for China is crucial for oil prices because the nation is the world’s second biggest economy and key driver of commodities consumption.

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.

“This is likely a spillover effect from the sharp declines in the Chinese stock market”.

A rise in exports of crude oil from Iran once its sanctions have been lifted depends on the future global demand for oil and should not weaken the price of oil any further said senior officials from the Islamic Republic.

“Oil futures saw some demand today as there was a slight improvement in market sentiment after China’s central bank fixed the yuan mid-point more or less the same from the previous day”, said IG Markets analyst Bernard Aw.

Early in the day, Brent crude, the European benchmark, slipped as low as $35.54 per barrel – its lowest level in more than 11 years. Manufacturing activity in India fell for the first time in two years.

“I don’t think Saudi Arabia is going to let Iran come into the market and take their market share without a fight”, Speer said, referring to the fact that millions of barrels of Iranian crude per day is expected to enter the world market this year as sanctions over Iran’s nuclear program are lifted. Oil-rich Alaska had its credit rating cut by Standard & Poor’s as low prices left the state with a growing gap in its budget.

In Algeria, an explosion and fire at the Skikda oil refinery injured 18 people, but production was unaffected because the incident occurred in a unit used to fill butane bottles.