Oil prices rebound after falling to lowest mark since global recession

Brent lost around 4% on Monday morning, as crude oil prices took another leg down amid further fears for the oversupplied oil market.

Yesterday the blue chip index closed down 1.3% to trade at 5,874 points, its lowest level since December 2012, due to another large drop in oil price.

One concern is that the global surplus of oil.

With low oil prices expected for longer, companies in the oil and gas industry will continue to face a lot of pressure. This report also showed lower refinery inputs, meaning lower demand for crude oil. This comes as global energy markets are battling with a persistent supply glut, which triggered a slump in oil prices in the summer of 2014. So, the prices were unable to recover.

Overnight, U.S. crude futures rallied in afternoon trading amid heavy profit taking, after briefly dropping below $35 a barrel earlier in Monday’s session to fall to fresh multi-year lows. The oversupply issue is only going to be worsened by Iran, which is gearing up for its highly-anticipated return to global oil markets after years of sanctions had blocked it. Iran has said it will boost its output by 500,000 barrels per day immediately after sanctions are lifted, possibly as early as next month.

Iran, which expects global sanctions over its nuclear programme to be lifted by the first week of January, has already secured customers for its planned supply expansion, Zamaninia said in an interview in Tehran.

Market participants will be watching the U.S. Federal Reserve meeting on Tuesday and Wednesday for hints about the direction of U.S. interest rates (http://www.marketwatch.com/story/pitfalls-aplenty-for-fed-as-it-prepares-to-raise-rates-2015-12-11).

But it said it didn’t believe the world would run out of storage capacity OPEC supply is likely to increase by 1 million bpd next year, Morgan Stanley analysts said in a research note Monday. “The Opec decision 10 days ago just exacerbated worries about excess supply”, said Bob Yawger, director of the futures division at Mizuho Securities USA in NY.

Year to date, the ICE U.S. Dollar Index has gained by more than 8%, while WTI oil prices are set for a loss of more than 30%.

Global oil demand will rise by about 1.3m barrels a day next year, higher than the previous estimate by Moody’s, as consumption increases in the US, China and Russian Federation, the agency forecast.

“In order for us to be long-term sustainable [with the] oil price at $40, we need to do additional cuts, but if the oil price goes to $20 we need to do even more cuts”.