Oil prices resume decline on supply glut worries

Oil prices remained weak in Asian trade Thursday after sharp losses in the previous session that drove Nymex oil futures below the $50 a barrel mark-the first time it has settled below that level since April 2.

Brent has lost around 12 percent in July, its largest one-month fall since March, mainly due to the constant oversupply of crude oil and it is expected to get worse, if and when sanctions against Iran is being lifted.

The return of Iranian oil “is adding bearish pressure as the market is trying to price in the crude expected to be introduced by the end of the year”, said Ang.

Brent for September settlement dropped 91 cents, or 1.6 per cent, to $US55.22 at 2.32pm on the London-based ICE Futures Europe exchange. Crude has now fallen by about 20% in the last six weeks.

Brent September crude fell 86 cents to settle at $55.27, the lowest since April 2.

WTI, the US benchmark, was up about four tenths of a percent to $50.15 per barrel in early Tuesday trading.

The US Department of Energy on Wednesday said the country’s commercial crude stockpiles rose 2.5 million barrels last week, while supplies at the closely watched Cushing, Oklahoma, hub were up 800,000 barrels.

“The supply glut is the main focus of the market and it’s going to be exacerbated by Iranian production”, Gene McGillian, a senior analyst at Tradition Energy in Stamford, Conn., said by phone Tuesday.

Since oil is priced in dollars, a stronger US currency makes the commodity more expensive, denting demand and putting downward pressure on prices.

Meanwhile, Israel has sounded its concerns about the deal saying the concessions awarded to Iran for ensuring the contract could finally help the oil producer develop nuclear arms, which is not favourable for Jerusalem.

Oil could EVEN plummet to $35 a barrel, the founder of Oil Price Information Services Tom Kloza told CNBC in November 2014.

Iran is seeking to produce nearly 4 million barrels a day within seven months of sanctions being removed, expanding to 4.7 million as soon as feasible after that, Zanganeh said in Tehran on Monday.

“The commodity price is telling the U.S. shale sector to shrink”, said Subash Chandra, an oil analyst at Guggenheim Securities LLC in New York.

There’s a chance that the downturn in the global oil industry may be more severe than in 1986, when business endured the deepest slump in 45 years, according to Morgan Stanley.