Oil prices may fall further this year, the IEA says
With U.S. markets closed for the Martin Luther King Day holiday, U.S. stock index futures slipped 0.3 percent SPc1.
US crude prices have fallen 24 percent since the beginning of the year.
And in major crude producer Russian Federation, the ruble fell close to a historic low as stock markets slumped on the back of sliding oil prices.
“Iran’s return to the oil market has been on the agenda for some time and therefore does not really come as any great surprise”, Commerzbank senior analyst Carsten Fritsch said in a note. “Iran is not new, but we’ve arrived now at the point where sanctions have been removed and it’s going to be a key focus for the markets over coming weeks”. Brent prices are down nearly 25% since the start of the year, as lingering concerns over China’s economic outlook added to the view that a global supply glut may stick around for much longer than anticipated.
Brent capped a third annual loss in 2015 as Opec effectively abandoned output limits amid a global surplus.
“While the lifting of sanctions in Iran was well flagged, the prospect of additional supply from Iran has seen oil prices slide further”, added O’Keeffe. Last month, OPEC predicted a drop of 380,000 bpd. The European benchmark crude ended the session at a discount of 81 cents to WTI for March.
NYMEX crude for February delivery CLc1 was down 86 cents at $28.56 a barrel, after falling more than $1 earlier to $28.36, the lowest since October 30, 2003. That’s still about 600,000 a day more than the average of 31.7 million required in 2016. Prices have lost 22 per cent this year.
Buyers of Iranian crude are free to import as much of its oil as they want after the International Atomic Energy Agency determined that the country had curbed its ability to develop a nuclear weapon.
And although analysts expect Iran to take some time before being able to fully revive its export infrastructure, suffering from years of underinvestment during the sanctions, it does have at least a dozen Very Large Crude Carrier super-tankers filled and in place to sell into the market.
Iran has made it clear that once sanctions are lifted it is set to significantly boost its oil output in order to increase government revenues.
Iran is the fifth biggest Opec producer.
“As Iran has fulfilled its commitments, today, multilateral and national economic and financial sanctions related to Iran’s nuclear program are lifted in accordance”, said a joint statement read by Iranian Foreign Minister Mohammad Javad Zarif and European Union Foreign Policy Chief Federica Mogherini. The agency projects demand growth of 1.2 million barrels per day in 2016; this matches up against OPEC’s view of +1.26 million bpd, and EIA’s +1.4 million bpd.
United States companies’ fourth-quarter profits are expected to decline more than four per cent, which would be the second straight quarterly decline.
But this month, more than 15 million barrels of grades such as Nigerian Bonga and UK Brent are set to sail across the Atlantic, according to fixtures and trade sources, which would be the most for any month since 2013, US data show.