Oil slides on Saudi comments, falls more on API inventory data

“Iran’s early post-sanctions marketing appears to be effective with the National Iranian Oil Company indicating that exports have risen by 500,000 barrels per day since sanctions were lifted in mid-January, although we expect that some of this volume was sold out of storage”, investment bank Jefferies said. The US-based Schork Report said that seasonally falling crude oil demand towards the end of the winter heating season also weighed on markets.

Oil futures fell more than 1 percent on Tuesday amid worries rising Iranian output would deepen a global crude oversupply, offsetting expectations of a drop in USA production that had spurred sharp price gains in the prior session.

A persistent surplus could weigh on prices, which have collapsed to a 12-year low of $27.10 a barrel last month from over $100 in mid-2014.

The International Energy Agency said in its medium-term outlook on Monday that US shale oil production was expected to fall by 600,000 barrels per day this year and another 200,000 bpd in 2017. The agency is referring to the capability of USA shale producers to turn on the crude oil taps as quickly as they were able to shut them down. He and Birol declined to blame low oil prices on OPEC’s decision to keep pumping away to preserve market share in the face of rising competition from the USA and elsewhere.

The other side of the coin, however, is that dwindling investment in new supply could lead to a spike in prices later in the report’s 2015 to 2021 forecast period.

If U.S. crude futures drop below $31.30 a barrel, there may another downward leg, said Zahir, adding that crude stockpiles are expected to build as refineries shut for spring maintenance. India is forecast to post the most growth, while demand from China is expected to cool as the country’s economy cools.

Key oil exporters Saudi Arabia and Russian Federation have proposed to freeze output at January levels, which were near record highs, only if other producers also do the same. Brent crude, the global benchmark, climbed $1.68, or 5.1 percent, to $34.69 a barrel in London.

Oil prices have found support from some investors believing that the agreement could lead to steps to tackle a global supply glut that has dragged prices to their lowest levels in almost 13 years.