Oil Rebounds as Iran Worries Seen as Overdone

“The oil market faces the third successive year when supply will exceed demand by 1 million barrels per day and there will be enormous strain on the ability of the oil system to absorb it efficiently”, IEA says.

“We are reducing our oil price estimates in light of continuing oversupply in the global oil markets, with Iran poised to add more than 500,000 barrels per day (bpd) to global supply while demand growth remains tepid”, Moody’s said in a statement.

West Texas Intermediate for March delivery gained as much as 37 cents to US$28.72 (RM127.15) a barrel on the New York Mercantile Exchange and was at US$28.60 at 7.39am Hong Kong time.

“Some of the big fund traders were pushing the February contract down, and that really seemed to be part of the weakness in the market”, said Phil Flynn, senior market analyst at the Price Futures Group. Preliminary Reuters calculations based on government figures showed record oil consumption of 10.32 million barrels per day (bpd), up 2.5 percent from 2014, defying slowing growth in the world’s second-largest economy. More crude from Iran could boost global supplies further. The prices for oil is predicted to fall further during the upcoming months of the year.

On Monday, oil prices hovered around the $28 a barrel mark on news sanctions on Iran were being lifted. High-sulfur crude is often priced lower than other varieties because specialized equipment is needed to process it. But the near-zero price of this crude still underscores the dire conditions of US oil.

The downward pressure on oil prices is also driven by the fear that as China’s economy slows, the country’s demand for oil will drop. A report by energy consultancy Wood Mackenzie published on Thursday found oil companies had delayed making decisions on 68 major projects world-wide previous year.

In comments posted on the Iranian petroleum ministry’s website on Monday, deputy minister Roknoddin Javadi said Iran is determined to regain its market share, which collapsed after the global sanctions were imposed in 2012. “Our assessment is that around 300,000 b/d of additional crude could be flowing to world markets by the end of the current quarter”.