Brent crude falls to 13-year low

“I tend to think about lower oil prices on balance as being good news for the world economy, certainly good news for the European economy, maybe modestly good news for the US economy”, he said.

“This is three or four months ahead of what the market was thinking previous year, so it just adds fuel to the fire”, Mitsubishi Corp oil risk manager Tony Nunan told Reuters.

Adding to the demand concerns stemming from the Chinese equity market rout is the uncertainty, regarding Iranian oil being introduced in the foreseeable future.

The global benchmark settled up 72 cents, or 2.4 per cent, at $31.03 a barrel on Thursday. As a part of the nuclear accord made earlier in 2015, trade sanctions on Iran will be lifted soon.

Tomorrow it is expected that the United Nations will open the door for sanctions on crude sales to be lifted – should it confirm that the country’s nuclear programme has been curtailed as previously agreed. West Texas Intermediate (WTI) erased earlier gains and was down 12 cents at $30.36 a barrel.

The price crash “intensifies the squeeze on working capital and makes effective cash management all the more important”, said Lance Kawaguchi, managing director and global sector head for energy and resources at HSBC. Iran’s oil exports were already on target to hit a nine-month high in January, with 1.10 million barrels a day of crude, excluding condensate, to load.

On top of the potential addition of an average of one million barrels a day of crude supply, the country is also estimated to have more than 30 million barrels of oil stored offshore that is ready to hit the global market immediately after sanctions are removed.

While demand seems to be dampening, crude oil producers are ramping up production rates. Commerzbank cut its 2016 forecast for oil prices, changing its year-end expectation for Brent to $50 per barrel, down from a previous forecast of $63.

The report painted “a very bearish picture” f the market, said Bob Yawger, director of the futures division of Mizuho Securities USA.

The looming return of Iranian oil exports to the market after Iran meets the conditions of its nuclear deal with major powers also hangs over sentiment.

The US$30 mark is both a psychological and financial threshold and, in recent days, traders have poured money into US$30 put options for expiration in February and March.