Brent Crude Drops Below $30 a Barrel as Iran Spooks Market

Fadel Gheit, an analyst at Oppenheimer & Co, said as many as half of the independent drilling companies working in USA shale fields could go bankrupt before oil prices stabilize. It dropped 97 cents on Tuesday, closing at $30.44 per barrel.

Europe’s Brent North Sea crude for February had earlier dived to $30.43 (A$43.57), a point last seen on April 6, 2004.

WTI is down about 20 percent from a high on the first day of trading in 2016 and fell through the important $30 barrier on Tuesday before recouping some of the losses. Concerns that China’s economic growth may slow has soured investors on the prospects for a quick recovery, turning hedge funds the least bullish in five years.

Brent crude, the global benchmark, was up 90 cents, almost 3 percent, at $31.76 a barrel at 1343 GMT, but remained near lows last seen almost 12 years ago.

The CBOE Crude Oil Volatility Index, a gauge of anticipated swings in USA crude prices, rose Tuesday to the highest since 2009.

According to a monthly OPEC report, released Dec.10, the total OPEC crude oil production in November rose by 0.23 million barrels per day (mb/d) to 31.

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The crude oil market did react when it was reported that Iran captured two US navy ships they said were “snooping” but the reaction to the incident was a far cry from the reaction back in 2007 when Iran took control of a United Kingdom ship.

“Overall, it’s a bearish report”.

“Saudi Arabia has been traditionally the solo controller of oil prices in the last 30 years, cutting its production volume whenever the prices decrease”.

The oil markets are concerned that the slowdown in China’s economy, the world’s second-largest, will suppress demand even more.

“China increased imports by 8.8% in 2015 to 334 million tonnes”.

Crude fell as much as 2.9 per cent in London on signs that a nuclear deal between Iran and world powers may be implemented by the time markets open on Monday, triggering sanctions relief for Iran that paves the way for a surge in oil exports.

Analysts say the country could quickly ramp up production by around 500,000 barrels, adding to the glut of oil that has sent prices tumbling.

As part of its ongoing energy reforms, Beijing has been allowing more small and privately-owned refiners, known as “teapots”, to import crude directly from foreign sources.