Oil hovers at 12-year lows as Iran supply looms
LONDON: Oil prices steadied on Thursday, but remained near 12-year lows on the prospect of Iran unleashing its oil on an oversupplied market and with few signs of improving demand in a fragile global economy.
Brent crude, the global benchmark, traded at $30.66 a barrel, up 35 cents day on day, at 1146 GMT. It fell earlier to $29.73, the weakest since February 2004.
West Texas Intermediate (WTI) was up 22 cents at $30.70 a barrel.
“With no apparent signs of strengthening demand, and only further indicators of future global supply growth, the outlook for oil prices is leading most market watchers to ratchet down estimates for oil prices in 2016 and 2017,” analysts at Cenkos Natural Resources said. The United Nations’ nuclear watchdog is likely to confirm on Friday that Iran has curtailed its nuclear program as agreed with world powers, paving the way for sanctions to be lifted.
Barclays said it had raised its estimates of Iranian oil supply on western sanctions being lifted sooner than expected. Analysts at the bank said they now assume that Iran will produce almost 700,000 barrels a day more in the fourth quarter of 2016 than over the same period in 2015.
Iran had said its exports would rise by 1 million barrels a day within six months of sanctions being lifted.
“This could drive prices down further in the short term purely on the basis of the psychological effect,” analysts at Commerzbank said.
Data showing that US crude inventories rose 234,000 barrels last week, much less than expectations, was overshadowed by reported builds of 8.4 million barrels in gasoline and over 6 million in distillates, which includes diesel and heating oil.
Oil and gas projects worth $380 billion have now been postponed or canceled since 2014 as companies slash costs to survive the oil price crash, including $170 billion of projects planned between 2016 and 2020, according to a new report from energy consultancy Wood Mackenzie.
Norway said on Thursday it expected investments in its oil and gas sector to fall to 135 billion crowns this year, down from 150 billion crowns in 2015.
The price fall “intensifies the squeeze on working capital and makes effective cash management all the more important,” said Lance Kawaguchi, managing director and global sector head for energy and resources at HSBC.