Oil prices stretch gains on cold US, European weather

“The market is already awash with the stuff and now Iran is adding to the mix, so we may witness even lower oil prices and for longer”, predicted analyst Fawad Razaqzada at traders Gain Capital. However, raising the deterrents on Iran would broaden the gap between demand and supply to lead to an imbalance in the market. Also, according to the energy agency, daily oil production from Iran will climb to four billion barrels by the end of this decade due to foreign investment. In the last half of 2015, global oil demand slipped due to changing weather conditions (unseasonably mild winter) in places like Japan, the USA, and Europe.

Analysts said the fundamental reason for low oil prices remained unchanged, with producers around the world pumping over 1 million barrels of crude every day beyond demand, leaving storage tanks brimming. Data on Wednesday from the American Petroleum Institute showed crude inventories rose by 4.6 million barrels. March Brent crude on London’s ICE Futures exchange rose $1.36 to $ 30.61 a barrel.

This is more bad news for Alaskans, whose state government has long relied on high crude oil prices to fund the lion’s share of state government.

But if oil has previewed the way down for stocks, it’s possible that a turnaround in oil prices could equally preview the way back up.

In the past one year, Sinopec stock went down more than 35% while PetroChina slipped more than 50%.

Will Oil Prices Decline Further? As Iran complied with the final terms of the agreement this past week, and is now out from under the sanctions imposed by the UN Security Council, it seems poised to push prices lower.

If we look at the effect of ramped up production from Iran on oil companies, coupled with the effect of Iraq’s growing output and the foreseeable increase in Libya’s production, today’s situation of oversupply in the market may remain for yet some time. Saudi Arabia is severely pinched by the Iran and European Union deal, which will likely restraint its production to some extent. – When the shale oil producers run out of steam.

European Central Bank President Mario Draghi hinted Thursday at more easing measures amid renewed pressure on inflation in European economies from falling oil prices.

The deceleration in China’s economy is also dimming the outlook on oil demand.

There is no indication that Saudi Arabia, the driving force behind of OPEC’s decision to quit supporting the oil price, is ready to consider abandoning its shock therapy.

“After large directional movements like those we’ve seen over recent weeks there tends to be corrective move in the opposite direction”, Ric Spooner, a chief analyst at CMC Markets in Sydney, said by phone.