Oil hit multi-month lows on record OPEC output

Brent crude, the global benchmark, fell about 50 per cent last year and dropped 2.1 per cent on Friday to $52.21 a barrel on the London-based ICE Futures Europe exchange. Oil companies in the U.S. have made an unprecedented cutback in drilling after prices slumped to a six-year low, while cheaper fuel is stimulating the nation’s consumption of gasoline.

Iran will be able to revive exports by about 650,000 barrels a day by mid-2016 if sanctions are removed following the July 14 agreement with world powers, Bank of America predicted.

Oil extended losses on Monday on worries of oversupply as the Organisation of the Petroleum Exporting Countries (OPEC) pumped at record levels in July, while weak China data stoked concerns about slower growth at the world’s second largest oil consumer. The European benchmark crude traded at a premium of $4.68 to West Texas Intermediate.

“What’s happening is the market is coming to terms with the fact that these lower prices have not resulted in any significant change in supply/demand economics”, ICAP oil broker Scott Sheldon said.

Russian oil shipments make up just a tiny 1 percent of total US crude imports, which still average more than 7m b/d, despite the vast surge in US crude production in the past 5 years, the newspaper wrote.

“The recent recovery in the oil rig count supports our expectation that U.S. producers can and will ramp up activity with WTI prices near $60/bbl, given improved returns with costs down 30 percent”, Goldman Sachs analysts said in a weekly rig count report.

A China factory index for July released Monday by Caixin Media and Markit Economics came in at 47.8, a decline from 49.4 in June, indicating the effects of easier monetary policy have yet to kick in. “Some of the most effective sanctions [against Iran] with regards to the oil industry were those that targeted aspects such as sales, volumes, shipment, insurance and the transfer of money”, Zangeneh said in an interview broadcast live on Iran’s state TV late on Saturday – broadcast by IRNA today.

The options market is not suggesting Brent will go into the kind of free-fall witnessed in the second half of 2014 that took 60 percent off the price. The Islamic Republic produced an average of 2.85 million barrels a day last month compared with 3.6 million at the end of 2011, according to estimates compiled by Bloomberg. The country’s official Purchasing Managers’ Index was 50 in July, down from 50.2 in the previous month.