Oil prices edge up after volatile session

While the global crude Brent stands at $37.51 per barrel, down from above $110 per barrel in June 2014.

“This is a method that countries like Saudi Arabia, Kuwait, UAE, the U.S”. Demand for gas grew at the highest rate in 30 years, Flynn says, while global demand growth was the strongest in over a decade.

The sanctions have halved Iran’s oil exports to around 1.1 million bpd from a pre-2012 level of 2.5 million bpd, and the loss of oil income has hampered investments.

How can we explain this crash, and where are oil prices headed? National Iranian Oil’s Mohsen Ghamsari believes it is trying to “regain its lost share” in the global crude oil market through increased exports. Consequently, the question for Iran is whether the desire to inflict economic havoc on Saudi Arabia is greater than the isolation that it will endure if it acts against the rest of the world in such a way.

Saudi’s monthly oil prices set the direction for other Opec producers Kuwait, Iran and Iraq which have undercut the top exporter in the last two years in a battle for market share amid low prices. Iran plans to raise oil output by half a million to 1 million bpd post sanctions, although Iranian officials said over the weekend they did not plan to flood the market with its crude if there was no demand for it.

With Brent and WTI still trading some two-thirds below theirmid-2014 highs, crude prices are likely to average around Dollars 50 a barrel amid the glut in global crude supplies, a Reuters poll of analysts showed. As Kuwait and the United Arab Emirates lined up to support Riyadh, the internal divisions that prevented the Organization of Petroleum Exporting Countries from making production cuts even as prices plunged to an 11-year low appeared more entrenched than ever. “I think President (Hassan) Rouhani on the Iranian side would like to calm things down and push for no further escalation”, Energy Aspects analyst Richard Mallinson said.

Following serial disposals of North Sea assets by major players getting out of what is an increasingly unprofitable area into the long term, the pattern is one of a worryingly large number of small players who geared up to buy assets coming on to the market and had not expected the serious price contraction that now threatens their survival.

Indeed, the quickly growing diplomatic crisis between Saudi Arabia and Iran (whereby Iran has compared Saudi Arabia’s royal family directly to ISIS and is now affecting Bahrain directly as well) could have unforeseen implications for the price of oil and the future of OPEC. It was the worst clash between the nations since the 1980s, adding to proxy wars they were already fighting from Syria to Yemen in a quest to gain influence in the Middle East. The last four times crude oil prices had a sharp rebound, it was followed by a recession.