Oil in London traded below $50 a barrel near a six-month low amid speculation Iranian supplies will exacerbate a global surplus as demand from the U.S. to China slows.
Brent futures were little changed after falling 5.2 percent on Monday to below $50 for the first time since January. The Obama administration won support from Gulf Arab allies for its nuclear deal with Iran, which has pledged to boost production when sanctions end. U.S. refineries, which turned a record amount of crude into gasoline during July, typically slow down from August through October for maintenance.
Oil is trading in a bear market as expanding supplies and signs of slower economic growth in China fueled a rout in commodities from gold to copper. While U.S. crude stockpiles are forecast to have slid last week, they’re still about 95 million barrels above the five-year seasonal average level.
“Downside momentum continues and there’s really at this stage no sign of release from the oversupply problem, which is what’s putting pressure on prices,” Ric Spooner, a chief analyst at CMC Markets in Sydney, said by phone. “Lifting of Iran oil sanctions is highly likely to be the major new source of supply.”
Brent for September settlement was at $49.74 a barrel on the London-based ICE Futures Europe exchange, up 22 cents, at 1:46 p.m. Singapore time. The contract dropped $2.69 to $49.52 on Monday, the lowest close since Jan. 29. The European benchmark crude traded at a premium of $4.16 to West Texas Intermediate, the U.S. marker grade.
Nuclear Deal
WTI for September delivery was 40 cents higher at $45.57 a barrel in electronic trading on the New York Mercantile Exchange. It declined $1.95 to $45.17 on Monday, the lowest close since March 19. Total volume was about 1 percent above the 100-day average. Prices have decreased more than 20 percent from this year’s high in June, meeting a common definition of a bear market.
Secretary of State John Kerry, visiting Qatar, said Monday foreign ministers from the Gulf Cooperation Council agreed the accord with world powers curbing Iran’s nuclear program in return for easing sanctions will contribute to regional security.
Iran can boost oil production by 500,000 barrels a day within a week after international curbs are lifted and by 1 million a day a month following that, the state-run Islamic Republic News Agency reported, citing Oil Minister Bijan Namdar Zanganeh. It pumped 2.85 million a day last month, compared with 3.6 million at the end of 2011, data compiled by Bloomberg showed.
China Slowdown
China’s official Purchasing Managers’ Index and a factory index both fell in July, indicating that efforts to bolster the world’s second-largest economy have yet to fuel a recovery.
In the U.S., the biggest oil consumer globally, crude inventories probably shrank by 1.63 million barrels through July 31, according to the median estimate in a Bloomberg survey of eight analysts before an Energy Information Administration report Wednesday. Supplies dropped to 459.7 million in the prior week, the Energy Department’s statistical arm said.
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