Oil Price Plunge Continues, Falls Below $27

“We should see an effect on production”. Therefore, oil demand growth dropped to a year low to 1 million barrels per day in 4QFY15 from the figure of 2.1 million barrels a day reported in 3QFY15. However, the markets seemed more than ready to absorb it. The oil price rebound, small as it was, has already fizzled, even though prices are now heading to such lows that a more sustained rebound could occur by the end of 2016. Crude oil prices have fallen by about 40 percent since then.

Putting the price in perspective, oil has reached a 12-year low and lost 70% of value in 18 months. He added that a “very broad-based sell-off across assets and across the world” would amplify pressure on oil prices.

According to the U.S. Energy Information Administration, sanctions relief will lead to an increase in Iran’s crude oil production and exports.

The lifting of Iran’s sanctions has been anticipated in the market for a long time.

Similarly, OPEC countries are reluctant to implement a production cut despite sluggish demand and the difference in demand and supply is continuously increasing. Previously, oil producers other than Organization of the Petroleum Exporting Countries (OPEC) aimed to reduce oil production by 600,000 barrel a day.

Would it surprise you to know that the oil market has been nearly equivalently oversupplied since late 2012?

The market has been awash with supplies owing to high production levels in the U.S. and by the OPEC cartel, which previous year rejected calls to slash output as it looks to maintain its market share.

“There are considerable uncertainties around the quality and quantity of oil that Iran can offer to the market in the short term, ” the IEA noted. It is projected at less than 0.2 million barrels per day in the fourth quarter of 2015, compared with 2.7 million barrels per day a year earlier. This meant a further reduction in revenues for the country’s budget, which caused the expected deficit to climb up to $38.6 billion in 2016.

“We spoke about a special meeting of an Iran-Venezuela high level joint commission to work on new agreements in ‘the fields of the development of science, technology, trade, banking, industry and housing, ” said Maduro at a meeting between Venezuelan officials and businessmen to address the economic crisis in the country.

Energy market watchers expect the global crude glut to persist through at least the end of this year, adding to stockpiles that in some places are testing tank limits. The global economy will suffer the most and major oil producing nations and oil and gas companies will likely suffer huge losses.