Crude oil falls as market braces for more Iranian oil

Brent crude futures clawed back from 12-year lows on Friday, but intense downward pressure remained as the market braced for increased Iranian oil exports once worldwide sanctions are lifted, possibly within days.

Oil headed for its third weekly decline after dropping below $30 a barrel as US crude stockpiles expanded and Iran moved closer to increasing exports, exacerbating a global glut.

Prices dropped below US$30 on Wednesday for the first time since April 2004.

USA oil is trading at a rare premium to Brent, reflecting the hit that the global benchmark is taking with potentially more crude from Iran flowing as sanctions imposed on the country for its nuclear program may be lifted as early as Friday.

USA benchmark West Texas Intermediate for delivery in February was up 33 cents at $30.81 at around 0810 GMT.

Opec’s Reference Basket of Crudes (ORB) is made up of: Saharan Blend (Algeria), Girassol (Angola), Oriente (Ecuador), Minas (Indonesia), Iran Heavy, Basra Light (Iraq), Kuwait Export, Es Sider (Libya), Bonny Light (Nigeria), Qatar Marine, Arab Light (Saudi Arabia), Murban (UAE) and Merey (Venezuela).

The March Brent LCOc1 contract was down $1.15 at $29.73 a barrel.

FRAYED NERVES: Oil prices at 12-year lows and the volatile start to 2016 in China’s stock and currency markets have unleashed a torrent of negativity among investors.

“This could give some oil market jitters”, said Michael Poulsen, oil analyst at Global Risk Management.

WALL STREET: The Dow lost 364.81 points, or 2.2 percent, to 16,151.41 on Wednesday.

The United Nations’ nuclear watchdog International Atomic Energy Agency (IAEA) is expected to confirm that Iran has restricted its nuclear programme as agreed with world powers, which may lead to the lifting of sanctions. Analysts at the bank said they now assume that Iran will produce nearly 700,000 barrels a day more in the fourth quarter of 2016 than over the same period in 2015.

Iranian Oil Minister Bijan Namdar Zanganeh has pledged to boost output by 0.5 million barrel per day within weeks of the end of sanctions and by the same amount again in six months, according to an ANZ report.

Despite the low commodity prices, shale producers in the U.S. have kept their production rates hovering near record levels.