Oil plunged to fresh 12-year lows under US$27 on Wednesday (Jan 20), slammed by gloomy economic forecasts, China’s slowdown and abundant crude supplies. Approaching midday in London, Brent North Sea crude for delivery in March shed 67 cents to hit USD 28.09 compared with the close on Tuesday.
“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.
Front-month Brent crude futures were trading at $29.42 per barrel at 0757 GMT, up 87 cents from their last settlement.
“Can it go any lower?” the agency asked. The February contract expired Wednesday after dropping 6.7 percent to $26.55.
USA commercial crude oil stocks were forecast to have risen by three million barrels last week.
“Until we have priced in all the concerns about slowing economic growth, especially in China and the emerging countries, or we can see the signs of oversupply about to abate, the market still has room to move on the downside”.
Worries are mounting as the oil prices were once again pulled down on Monday to below $28 a barrel in anticipation that lifting of sanctions against Iran will flood the oil market that’s already facing a glut. Both benchmarks are at their lowest levels since 2003.
“There could possibly be some relief in the second half of the year as people inevitably look forward to 2017”, IEA’s Neil Atkinson, head of the oil industry and markets division, said. He added that a “very broad-based sell-off across assets and across the world” amplified pressure on oil prices. Global oil demand fell to a one-year low in the fourth quarter of 2015, the IEA said. The country presently produces 2.8 million barrels per day and exports just over a million.
Nonetheless, a fall in non-OPEC production will be offset by higher production from Iran, while other Middle East producers are also likely to continue production to protect their share of the market, the IEA said. This represented 9%of total crude oil production from OPEC. Prices lost 30 percent previous year. OPEC projects that non-OPEC crude oil production could fall in 2016 due to lower crude oil prices.