US crude holds below $50 as weekly stockpiles rise

Iran reportedly hoards 30 million barrels of oil in its reserves ready for export and many believe that as soon as the sanctions are lifted, crude prices could witness a huge plunge on the back of the underlying over-supply situation. The market continued to react to the potential of added crude oil from Iran as well, although experts vary widely on how much crude oil the country can actually produce, and how quickly.

September Brent crude on London’s ICE Futures exchange gave up 4 cents, or 0.1%, at $56.61 a barrel.

The contract later stood at $50.11 a barrel, also down four cents from Monday’s closing level.

In the coming week, investors would be closely watching the weekly crude oil report from the US Energy Information Administration, especially the inventory levels for the week ended July 17.

“By expanding its production to a three-year high, OPEC is ensuring that the oil market remains amply supplied…”

The oil market withered despite a weaker dollar, which generally tends to make greenback-priced crude oil less expensive.

“Pessimism about oil prices because of the Iran nuclear deal and economic concern about China and Europe are overblown”, they said.

A second Gulf delegate said even if prices fell slightly below a barrel, as long as the drop is for a short time it is unlikely OPEC would lower its output ceiling. If it broke through that mark, it could fall to the mid-$30s, he said.

The session low of US$48.21 was the lowest front-month intraday price since April 2.

If storage tanks in Cushing, Okla., the nation’s delivery point for oil futures contracts, reach their limit, it could throw more oil onto an oversupplied market.

Saudi Arabia’s crude oil exports fell in May to their lowest since December, with official data showing daily shipments stood at 6.935 million barrels a day (bpd) compared with 7.737 million bpd in April.

Phil Flynn, senior energy analyst with the Price Futures Group, says fears of an Iranian oil surge are largely unfounded because it will take the country many months to ramp up its production facilities. Lower prices lead to some slower production, as we saw in the Bakken earlier this year, and some additional consumption, as we have seen in U.S. driving habit this summer, and ultimately to a rebalancing.