Oil prices gain further

North Sea Brent futures are close to falling to their lowest level since mid-2004 when they traded at $36.20.

With global oversupply still dictating price trends, USA benchmark West Texas Intermediate for delivery in January was up 79 cents at $37.10 a barrel in Tuesday trading.

Moody’s posted new forecasts for oil prices in 2016 that are much lower than its earlier projections.

Crude oil prices have tanked to seven-year lows: U.S. WTI oil is down around $36 a barrel now while Brent crude is around $38 a barrel.

Iranian supply “could even hit the market as or before winter demand peaks” and as demand from refiners tails off during their seasonal maintenance period, he said.

But on the whole the average producer will still be incentivized, at current prices, to continue producing and selling oil at prevailing prices. Other non-OPEC members such as Russian Federation have also experienced economic turmoil and recession caused in no small part by the decline in oil prices.

According to the agency, global oil supplies climbed past 97 million barrels per day in in October, as non-OPEC output recovered from lower levels in September.

Moody’s forecast that global oil demand will rise by roughly 1.3 million barrels per day in 2016, an increase from its previous assumptions as oil consumption picks up in countries such as the US, China, India and Russian Federation. “Russian Federation also significantly increased production, and possible lifting of sanctions against Iran in 2016 may flood the market even with more oil”, Moody’s senior vice president Terry Marshall said. “It will take time for these large global inventories to unwind”.

Schneider Electric energy industry analyst David Hunter said: “The recent dip in oil prices is significant enough to suggest that the market is spooked by Opec’s meeting last week and there could be further reductions to come”. “I’ve been in the oil business all my life”. The OPEC chief signaled the group has no need to cut production yet, despite the price collapse to the lowest in six years.

With all producers “maxed out” on production by then, it may be a better time discuss a production cut, Barbajosa added.

If the United States started exporting large volumes of excess oil, it would alleviate pressure on its swelling storage tanks.