Oil futures slip further after oversupply forecast

Meanwhile, U.S. Senate negotiators are also allegedly nearing a deal that would allow unfettered crude oil exports for the first time in 40 years.

Oil prices fell for a seventh straight session on Monday, coming close to their 11-year lows, on growing fears that the global oil glut would worsen in the months to come in a pricing war between key producers. Also, analysts are expecting crude oil to remain lower for as long as oversupplies continue.

Brent and USA crude futures fell by as much as 4 percent to their lowest levels since the start of the 2008 financial crisis, before paring losses on some short-covering.

Brent futures was up 5 cents at $37.98 a barrel by 11:55 a.m. EST (1655 GMT).

Crude has slumped dramatically since the OPEC oil producers’ group on December 4 opted against cutting its output levels, and there are warnings of further pain ahead as the global economy struggles.

Crude-oil futures have been facing severe headwinds since previous year, when prices for the USA and global benchmarks shed more than half their value from the highs seen in June 2014.

New supply will likely hit the market at some point early in 2016 as Iran an OPEC member ramps up its production once the sanctions have been lifted following its agreement from July on its controversial nuclear program. “In addition to volumes released from storage, Iran will be able to increase crude oil and condensates exports by a maximum of 700,000 barrels a day by end-2016”, it said.

China has been taking advantage of the declining worldwide crude oil prices to largely expand its strategic petroleum reserve, according to reports by Chinese media. USA crude was up 3 cents to $36.34, after falling slightly earlier.

Volatility swept through world markets on Monday. If the ban is lifted, analysts say, the USA benchmark could trade equal to or even higher than Brent prices.

The bank believes that the market is oversimplifying OPEC’s high production strategy. Year-to-date, prices for both grades have fallen over 30%.

Nevertheless, it is business as usual in Iran where production costs in some central oil fields wallow at $1-$1.5 a barrel. The supply glut will persist at least until late 2016 as demand growth slows and OPEC shows “renewed determination” to maximize output, according to the International Energy Agency. In its December oil market report, the Paris-based IEA said that global demand will grow by just 1.2 million barrels per day next year, down from a previous estimate of 1.8 million, widening the gulf in the supply-demand imbalance worldwide.