Oil rises, reversing course after nearing 11-year lows

Oil fell to a seven-year low on Monday and close to the levels hit during the financial crisis amid increased expectations of a persistent oversupply in crude.

In addition, falls in non-OPEC supply should help to reduce the amount of excess supply in the market.

“The real worst case scenario for Iran had been to be unable to ship any oil due to the embargo, so if you can ship some oil at depressed prices then it’s far better than the prior state of affairs”, economists at Scotiabank said. However, these prices would “still support some development of the world’s most expensive oil in an environment of lower development costs than in recent years”.

US crude oil prices fell in early Asian trade, resuming their decline after strong gains on Monday snapped a six-day losing streak, on concerns about a global glut and mild winter demand.

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.

New supply is likely to hit the market early next year as OPEC member Iran ramps up production once sanctions are lifted as expected following the July agreement on its disputed nuclear programme.

Prices have fallen every day since the cartel on Friday made a decision to continue pumping oil at its current output level, which essentially legitimizes production of roughly 31.5 million barrels a day, which was running above OPEC output ceiling of 30 million barrels a day.

West Texas Intermediate CLc1 fell 5 cents to 36.26 by 0024 GMT.

The resulting gasoline demand is expected to spur refiners to produce as much fuel as they can and should bolster 2016 crude demand as long as refining margins remain profitable.

Iran needs $250 billion of investment in its oil industry between 2016 and 2025, including $176 billion in its upstream sector and another $77 billion in downstream spending, Kardor said then. “I wouldn’t be surprised if we bounce strongly from here”, said Matthew Smith, director of commodity research at ClipperData, which tracks global crude shipments.

“The price war will likely drag on until the end of next year”, said Mr Hong Sung Ki, a commodities analyst at Samsung Futures in Seoul.

Ted Sloup of iiTrader.com called the rebound “a healthy correction” in a technically oversold market but added that the mood was “still very bearish” as investors continued to worry about global oversupply.