Oil industry exec: US crude exports help keep prices low

Brent crude tumbled 35% past year, as Saudi Arabia and other members of OPEC chose to protect their market share instead of cutting output in an effort to support prices. At below $36 a barrel on Tuesday, the price is down more than 2 percent in 2016.

The impact on the oil market of the breach in diplomatic relations between Saudi Arabia and Iran will be temporary, and the surplus of crude in the market is a bigger threat, Iran’s national representative to OPEC was quoted as saying on Wednesday.

However concerns over economic weakness in China are helping to keep prices lower as it would dampen demand in the world’s second biggest economy and top energy consumer. The U.S. Energy Department expects the nation’s production to drop by about 500,000 barrels a day this year, but OPEC has vowed to hold to existing production levels.

US West Texas Intermediate (WTI) crude slipped 79 cents to settle at US$35.97 a barrel.

A fifth consecutive month of weaker manufacturing data in China and evidence of ever-lower rail freight volumes have spread panic among Chinese investors, leading to a 7% fall in equity prices on Monday.

Evidence of slowing economic growth in China and India has meanwhile fueled fears that even strong demand elsewhere may not be enough to mop up the excess crude that has resulted from near-record production over the previous year. Government figures show that the stockpile of USA crude oil grew by 2.6million barrels during the week that ended December25 and was 9.9million barrels higher than a year earlier.

Saudi Arabia won’t limit production and will seek to supply any demand from the market, Ali Al-Naimi, the country’s oil minister, said on 30 December on state television.

It’s been removed by the epic supply glut set in motion by the USA shale oil boom and OPEC’s refusal to cut oil production, which have caused oil prices to crash since mid-2014. Saudi officials are reluctant to cut production in a bid to raise prices because they’ll just concede sales to US producers who will fill the void in supply.

The president and CEO of the American Petroleum Institute, Jack Gerard, says the 3-week-old law lifting a 40-year ban on crude exports has already changed the dynamics of the global oil industry.

A pledge to moderate exports would be a major shift in Iran’s policies in an environment when most OPEC and non-OPEC producers are fighting for market share despite a growing global oil glut.

Iranian oil exports are widely expected to increase in 2016 as Western sanctions against the country for its alleged nuclear weapons program are likely to be lifted.

Judith Dwarkin, chief economist at ITG Investment Research, said Iran’s confrontation with Saudi Arabia makes the Saudis unlikely to offset Iranian increases by trimming production. The nationwide average price for a gallon of regular is now $1.99, according to AAA, the auto club.