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Oil Prices: Largest Decrease In Two Months  

Oil prices have fallen the most in two months, pairing the biggest three-day rally in 25 years. This happened after speculation faded that OPEC might coordinate with some other nations to restrict supply.

As a consequence of rising supply having largely outpaced demand, crude will remain at $40 to $60 a barrel in 2016. Iran on his side is actually planning to boost its output by 1 million barrels a day within the next five months after sanctions against the country are lifted, sais Oil Minister Bijan Namdar Zanganeh.

West Texas Intermediate for October delivery dropped $3.79 to close at $45.41 a barrel on the New York Mercantile Exchange. Futures extended losses after the American Petroleum Institute was said to report U.S. crude supplies rose last week. Stockpiles climbed 7.6 million barrels. Brent for October settlement decreased $4.59, or 8.5 percent, to end the session at $49.56 a barrel on the London-based ICE Futures Europe exchange.

Oil Prices

According to a Bloomberg survey before an Energy Information Administration report on Wednesday, U.S. crude inventories have probably risen by 900,000 barrels last week. Such a gain in size would keep supplies more than 90 million barrels above the five-year seasonal average.

Helima Croft, chief commodities strategist at RBC Capital in New York said that “The fundamental part of the story hasn’t changed, the OPEC magazine story was treated like it was something new, but they’ve been saying since November that they wouldn’t cut alone.”

The 12 OPEC-members may want to shift policy and thus reduce output to keep Bent crude above $50 a barrel in case demain in emerging economies falters, Bank of America Corp. said last Friday. The bank added that Saudi Arabia, OPEC’s biggest member and architect of the current strategy to defend market share, “cannot sustain its spending sub-$40 a barrel for very long”.

The real consequence of the surplus in oil-production is that stockpiles will keep expanding for “the next few quarters” and excess inventories won’t clear until at least 2017, Vitol’s Taylor said Tuesday in an interview.

 

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