Oil Price Falls Below $28 a Barrel as Iran Sanctions Lifted

The sanction was lifted after Iran agreed to “roll back the scope of its nuclear” activities in a largely-criticised deal with the USA, meaning Iran can now sell its oil on the global economic market.

On Saturday, the USA and the European Union lifted economic sanctions that had shut Iran out of the global economic market for more than a decade.

The sale of this seaborne oil will allow Iran to get an immediate financial boost before it ramps up production.

“However, if Iran can move quickly to offer its oil under attractive terms there may be more “pricing in” to come”, meaning lower oil prices.

Slowing growth in China has been a factor in falling demand.

Oil prices rallied by as much as 4pc on Tuesday, touching $30, as China’s latest GDP figures suggested growth in the country remained broadly stable at 6.8pc in the final quarter of 2015.

At around 0250 GMT, US benchmark West Texas Intermediate (WTI) for delivery in February was down 30 cents, or 1.02 percent, at $29.12 a barrel.

Saudi Arabia, the biggest oil exporter, signaled again on Sunday it won’t relent in its strategy to preserve market share even as prices crash.

OPEC predicted in its monthly oil report that 2016 would be “the year when the rebalancing process starts”.

“After seven straight years of phenomenal non-OPEC supply growth, often greater than two million barrels a day, 2016 is set to see output decline as the effects of deep capex cuts start to feed through”, the producer group said, predicting that production from non-OPEC sources such as the USA and Canada would decline.

But the market then found brief support, rebounding above $29 on bargain-hunting and as OPEC hinted at a more rebalanced market, beginning this year.

“While the pace of stock-building eases in the second half of the year as supply from non-OPEC producers falls, unless something changes, the oil market could drown in over-supply”.

The IEA believes that by the end of the first quarter, around 300,000 barrels a day of additional crude oil could be flowing to world markets.

Stocks in Europe and Asia extended the global rout Monday, as crude oil hemorrhaged at a 12-year low on the prospect of a bump in exports from Iran.

China’s gross domestic product expanded by 6.9% year-over-year in 2015 (http://www.marketwatch.com/story/chinas-2015-economic-growth-slowest-in-25-years-2016-01-19), down from the 7.3% gain reported in 2014, data from the National Bureau of Statistics showed on Tuesday.

In addition, dollar strength will make oil imports more expensive for many countries, further dampening demand, the IEA said.

“Market forces as well as the co-operation among producing nations always lead to the restoration of stability”, said Saudi oil minister Ali al-Naimi on Monday.

While some analysts see an initial increase of 500 000 barrels per day or more in Iranian exports as easy to achieve, further production increases are considered a challenge.