Crude oil prices drop more than 1 percent as weak outlook prevails

U. S. West Texas Intermediate crude futures for January delivery were trading at $37.18 per barrel, that’s 69 cents or 1.82 percent down compared to their last settlement. Crude oil is trading at 36.60 in the red this morning compounding Wednesday’s declines.

Crude prices slumped in early Asia trade Wednesday as fear of expanding crude inventories in the US eroded earlier gains. Prices have decreased 32 percent this year.

“The oil prices in the next year (2016) will fluctuate between $35 to $50, so Iran is not anxious about a fall of its oil income”, Mehdi Asali said, Reuters reported.

The DoE’s announcement last week of an unexpected fall in United States commercial crude stockpiles, by 5.9 million barrels, briefly had pushed prices higher.

Crude prices have plunged two-thirds since mid-2014 as soaring output from the Organization of the Petroleum Exporting Countries, Russia and the United States created a global surplus of between half a million and 2 million barrels per day.

Having said that, recent data from the US Energy Information Administration showed that American oil stockpiles actually fell by about 5.8m barrels over the year, which is better (for the oil price at least) than the predicted rise of more than a million barrels, so there are signs that the oversupply is being reduced in some markets.

The market has been highly volatile during the holiday-shortened final week of 2015 and remained near multi-year lows in the face of indications a supply glut will continue into 2016. Oil futures took back much of the ground lost in Monday’s rout when both Nymex and Brent fell more than 3% after weak data out of China and Japan stoked concerns about demand. While U.S. output is down from a peak in April, production has fallen more slowly in response to low prices than many investors initially expected.

Saudi Arabia and its Gulf allies the UAE and Kuwait have said they are counting on global demand growth to help rebalance the market over the course of 2016. Brent settled down $US1.27 ($F2.70) at $US36.62 ($F77.95) a barrel, after falling to a session low of $US36.52 ($F77.73). At 1550 GMT, Brent traded $US1.10 lower at $US36.69 per barrel, less than $US1 away from 11-year lows reached last week.

Oil prices first surged around 3% overnight as the prospect of colder weather in North America elevated expectation for stronger demand for heating fuels.

Besides inventories, the EIA will also release its latest estimates of US production.

Iran’s production of oil stands at around 2 million barrels per day of which it can only export about 1 million barrels based on the current regime of sanctions.