Right now geopolitical tensions are as high as they’ve been in a long time, and the oil markets do not like it at all.
Oil prices fell as much as 35 percent for 2015 after a race to pump by Middle East crude producers and USA shale oil drillers created an unprecedented global glut that may take through 2016 to clear.
The sharp decline of the Chinese stock market is a due to fears over the country’s slowing economy. Venezuela has joined others in calling for meetings between OPEC and non-OPEC nations to stem the slide in crude prices, a proposal, Iran has rebuffed, rejecting any threat to its market share.
The amount of additional Iranian crude reaching foreign buyers will depend on conditions in an oil market oversupplied by 2.5 million to 3 million barrels a day, the Iranian Oil Ministry’s Shana news agency reported on Saturday, citing Mohsen Ghamsari, the head of global affairs at state-run National Iranian Oil Co.
Prices have since eased because “the market is still focused on the oversupply issue”, said UOB senior economist Alvin Liew.
Saudi Arabia is the biggest producer in the Organization of the Petroleum Exporting Countries (OPEC), which last month decided against cutting output levels despite a plunge in oil prices. Lower crude costs are helping boost returns for oil refiners in Asia, the region where most Middle Eastern crude is sold.
USA crude futures were down $1.66 at $34.31 a barrel, a little more than 30 cents shy of its nine-year low at$33.98 a barrel before Christmas.
However, concerns over mounting stock levels added pressure to prices, with crude inventories in the United States rising by 439,000 barrels last week, according to a Reuters poll of eight analysts.
Alliance Bernstein said it expected average Brent prices to fall from $53 per barrel previous year to $50 in 2016 but to recover to $70 a barrel in 2017 and to rise to $80 per barrel in 2018.
ANZ bank said the tensions between Saudi Arabia and Iran will “reduce the likelihood of any collaboration between the two oil majors regarding oil output as Iran re-enters the worldwide market once sanctions are lifted”.
Nymex reformulated gasoline blendstock for February-the benchmark gasoline contract-fell 171 points to $1.1447 a gallon, while February diesel traded at $1.0717, 89.99999 points lower.
At around Dollars 37 a barrel, oil prices are still at multi-year lows, after OPEC refused to lower its 30-million-barrel-a-day production ceiling at its production meeting in December.