Crude Oil Price To Drop Further As Iran Plans To Boost Output

The drop in the price of oil has been driven by oversupply, mainly due to U.S. shale oil flooding the market.

Iranian officials have said the country was preparing to increase production by 500,000 barrels a day. While non-OPEC supply is set to drop 600 000 barrels a day in 2016, Iran’s comeback could fill that gap by the middle of the year.

Unseasonably warm weather and rising supply will keep the crude oil market oversupplied until at least late 2016 and could push the price below its current 12-year lows, the International Energy Agency said on Tuesday.

Schieldrop, chief commodities analyst with SEB in Oslo, said a “very broad-based sell-off across assets and across the world” amplified pressure on oil prices. “Oil continues to be the shorters’ playground”, says Alastair McCaig of IG, referring to the traders who have bet prices would fall further – and won.

“However, if Iran can move quickly to offer its oil under attractive terms, there may be more “pricing in” to come”, it said.

Today, a fundamental shift has been announced in the Oil market by Saudi Aramco’s CEO in Davos at a time that price has hit technical support on an extreme move.

Forecasts by the EIA highlight that annual average crude oil production is forecast at 3.1 million barrels per day in 2016 and nearly 3.6 million barrels per day in 2017.

The world is “drowning” in oil, and weak demand has failed to match relentless pumping by the world’s biggest oil producers, the group said.

Iran could be the only source of supply growth in OPEC this year as a surge in Iraq fizzles out, the IEA said.

The Organisation of the Petroleum Exporting Countries (Opec) has acknowledged that an extra 2m barrels a day will hit the world market from projects already in the pipeline – including the US’s recently-lifted ban on exporting crude – adding to the “phenomenal” level of supply out there already.

The financial strains on exporters and the deep investment cutbacks in the industry are more than offsetting the expected gains from cheap oil enjoyed by key importers like Japan and the USA, the International Monetary Fund said.

It’s a hefty loss for a company which spent £20.6bn on two acquisitions in 2011 – a time when oil prices seemed destined to stay high.

On Monday, the oil minister of Oman said the country would cut its output by up to 10% to bring stability to the market, if other countries followed suit.