US Crude Oil Price Hits Another Low as Inventory Builds Up

Downward pressure on the global oil market has increased further after the International Energy Agency (IEA) warned on Tuesday that the oil market could “drown in oversupply”.

Brent crude futures have fallen to their lowest level since late 2003, tumbling below $30 a barrel, after the Organisation of Petroleum Exporting Countries (OPEC) said in December it would not cut output to halt the price slide despite global oversupply.

Brent crude oil prices shot up 2.1 percent in early trading to recover to $29.56 per barrel in NY.

Oil prices plunged to their lowest levels in nearly 13 years Wednesday helped by bearish sentiment caused by a supply glut, a stronger dollar and Iran’s return to the oil market.

The IEA predicted on Tuesday that oil prices would fall further this year as market supply is expected to greatly exceed demand.

“The EIA report played a big part in the price decline”, said Phillip Futures analyst Daniel Ang, adding that this underscored the current “bearishness in the market”.

The discount for Iran’s light crude also matches Saudi Arabia’s February OSP for sales of its Arab Light blend to northwest Europe. Oil traders are concerned that the crude oil supply glut could last longer. Persistent oversupply of oil, exceptionally mild temperatures in early winter and negative economic news from China, Brazil and Russian Federation all contributed to the reversal, the IEA said.

The exporter located in the Persian Gulf could add as many as 300,000 barrels per day by the end of March and then 600,000 barrels by the end of June, said the IEA. Iran, now relieved of sanctions, insists it will boost output by an immediate 500 kb/d, according to IEA’s report. In 2016, non-OPEC oil supply is now projected to contract by 0.66 million bpd year-on-years to average 56.21 million bpd.

On Monday, oil prices hovered around the $28 a barrel mark on news sanctions on Iran were being lifted.

The crash hammered Asian stock markets with MSCI’s broadest index of Asia-Pacific equities outside Japan falling 2.8 per cent to a four-year low.

The market drew support from preliminary Reuters calculations that showed oil in China, the world’s No. 2 oil consumer, likely hit a record high in 2015 of 10.32 million barrels per day (bpd), up 2.5 percent from 2014.