Inventory Data Adds to Oil Perils

Global crude production is outpacing demand following a boom in US shale oil and after a decision by the Organization of the Petroleum Exporting Countries a year ago not to cut production in order to defend market share.

“That extra OPEC oil is what’s keeping us in a market surplus”, added Evans.

Crude oil prices fall on slowing global energy demand and high inventories.

The immediate outlook for oil prices remains bleak, with some analysts like Goldman Sachs saying prices as low as US$20 per barrel might be necessary to push enough production out of business and allow a rebalancing of the market.

Expectations of a drawdown last week in United States crude inventories fed the rally.

He also predicted that global demand for crude oil will exceed 94 million barrels per day in 2016, and that the price of oil will not surpass $60 per barrel before 2020.

In 2016, Iran is expected to add its exports to the mix after Western sanctions on its oil come off. “Iran is gearing up to flood the market with 500,000 bpd within weeks of sanctions being lifted”, noted Ole Hansen, head of commodity strategy at Saxo Bank.

Similarly, the oil for delivery in February traded higher by Rs 9 or 0.37 per cent to Rs 2,540 per barrel in 147 lots.

Front-month U.S. West Texas Intermediate (WTI) futures CLc1 were trading at $36.75 per barrel at 0105 GMT, down 6 cents from Monday’s close.

Nigerian Government had predicated its 2016 budget on a benchmark oil price of $38 per barrel.

Oil resumed its decline after an industry report showing crude stockpiles increased in the U.S.

Daniel Ang, an investment analyst with Phillip Futures in Singapore, said the price weakness could have been sparked by data showing Japanese industrial production fell 1.0 percent in November from a month earlier.

Sentiment turned even more sour after Saudi Arabia’s energy minister said his country won’t adjust output despite falling prices. With the markets already being oversupplied by as much as two million barrels a day, increasing production rates in Saudi Arabia, Russia, and the USA increase fears of an oversupply persisting through the near future, taking its toll on crude oil prices.

“Iran will win back its global market quota in the post-sanctions era”, Rokneddin Javadi, managing director of the National Iranian Oil Co., told the Oil Ministry’s news website, SHANA, Oil Gas Daily reported.

Brent and USA crude prices inched up 3% on Monday, trading below $37 a barrel.