More oil supplies from post sanction Iran weigh on crude prices

Dubai: Additional oil supplies from sanctions-free Iran caused the sell-off in Brent crude early on Wednesday, but the upside was limited even as prices recovered later.

Brent crude traded at $30.78 a barrel, up 47 cents day on day. It fell earlier to $29.73, the weakest since February 2004. West Texas Intermediate for February delivery gained as much as 65 cents, or 2.1 per cent, to $31.13 a barrel. Prices slid below $30 Tuesday for the first time in 12 years.

“It was the crude inventory data which sparked the sell-off, you also need to castigate Iran news for this as well,” Naeem Aslam, chief market analyst with AVA Trade told Gulf News.

Iran, the fifth-biggest Opec member, will increase production by 100,000 barrels a day, or 3.7 per cent, a month after sanctions are lifted and by 400,000 in six months, according a Bloomberg poll. Oil Minister Bijan Namdar Zanganeh has pledged to boost output by half a million barrels a day within weeks of the end of sanctions and by the same amount again in six months.

Iran is trying to regain its lost market share and doesn’t intend to pressure prices, officials from its petroleum ministry and national oil company said this month.

Meanwhile, 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.

Recovery:

After the fall in prices in the initial part of the year, crude may witness a recovery later, an analyst said.

Brent may fall to $25/22 per barrel during this quarter and may recovery swiftly from there and may face resistance at $47/52 in the third quarter, said Osama Al Ashri, member of British organisation, Society of Technical Analysts.

Brent has shed more than 75 per cent of its value since 2011 mainly due to a supply glut in the market amid sagging demand. In 2015, Brent capped a third annual loss as the Organisation of Petroleum Exporting Countries effectively abandoned production limits amid a global surplus.