Oil prices drop towards 11-year lows
17 December 2015, Nirapad News: Oil prices fell for a seventh straight session on Monday, coming close to 11-year lows. This drop also raised fears that the global oil glut would worsen in the upcoming months in a pricing war between leading OPEC and non-OPEC producers.
Brent crude LCOc1 fell by 3.4 per cent to below $36.70 a barrel for the first time since December 2008 and U.S. West Texas Intermediate (WTI) CLc1 sank 2.5 per cent below $34.70 a barrel.
Brent traded less than 50 cents above the lows last seen during the 2008 financial crisis of $36.20 a barrel. If Brent falls below that level, that will be its lowest since mid-2004, when talk of a commodity super-cycle was only beginning.
WTI’s financial crisis low was $32.40 in December 2008.
“Oil is coming under pressure as the lack of OPEC cuts mean incessant oversupply continues,” said Amrita Sen from Energy Aspects think tank.
Both benchmarks have fallen every day since the OPEC abandoned its output ceiling on Dec. 4. In the past six sessions, they have shed more than 13 per cent each.
OPEC has been pumping near record levels since last year in an attempt to drive higher-cost producers such as US shale firms out of the market.
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.
“All new production will be earmarked for exports,” BMI Research said in a note. “In addition to volumes released from storage, Iran will be able to increase crude oil and condensates exports by a maximum of 700,000 b/d by end-2016,” it said.
Iran’s crude oil exports are set to hit a six-month high in December as buyers ramp up purchases in expectation that sanctions against the country will be lifted early next year, according to an industry source with knowledge of tanker loading schedules.
Iranian news agency Shana quoted managing director of Iran’s Central Oil Fields Company, Salbali Karimi, on Monday as saying Iran’s cost of production stood $1-$1.5 per barrel, and in a clear indication it would ramp up output in any price scenario.
On Friday, the International Energy Agency (IEA) said that the global supply glut was likely to deepen next year and put more pressure on prices but the world would not 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.