Brent oil rebounded after closing at the lowest level in more than 12 years in London. A persistent oversupply means prices still haven’t staved off the threat of further declines.
Futures advanced as much as 1.9 percent on Tuesday after dropping 8 percent the previous two sessions. Iran’s oil ministry gave directions to increase output by 500,000 barrels a day after international sanctions were lifted, the ministry’s news agency Shana said. The Persian Gulf nation’s first-quarter production increase is likely already priced into the market, according to a report from Goldman Sachs Group Inc.
Oil is down about 22 percent this year amid volatility in Chinese markets and speculation the removal of restrictions that capped Iran’s crude sales will help to prolong a global glut. Neighboring countries will pump more within six to 12 months and take away Iranian market share if the country doesn’t boost production, said Roknoddin Javadi, managing director of state- run National Iranian Oil Co., according to Shana.
“Nothing has really changed for the market, investors are still looking for producers to cut supply,” David Lennox, an analyst at Fat Prophets in Sydney, said by phone. “We’ve got Iran knocking on the door with a further 500,000 barrels a day and we think they’ll easily meet that target.”
Iran Output
Brent for March settlement climbed as much as 55 cents to $29.10 a barrel on the London-based ICE Futures Europe exchange, and was at $29.09 at 1:40 p.m. Hong Kong time. The contract fell 39 cents to $28.55 on Monday, the lowest close since December 2003. The European benchmark crude traded at a discount of $1.49 to West Texas Intermediate for March.
WTI for February delivery, which expires Wednesday, was 12 cents higher at $29.54 a barrel on the New York Mercantile Exchange. Monday’s transactions will be booked with Tuesday’s because of the Martin Luther King Jr. holiday. The contract closed at $29.42 a barrel on Jan. 15, the lowest settlement since November 2003. The more-active March future rose 18 cents to $30.57.
Iran, which was the second-biggest producer in the Organization of Petroleum Exporting Countries before sanctions were intensified in 2012, is targeting an immediate increase in shipments of 500,000 barrels a day, Amir Hossein Zamaninia, deputy oil minister for commerce and international affairs, said Sunday. The nation plans to add another half million barrels within months.
Floating Storage
An initial gain in exports will probably exceed an expected production increase given Iran has stockpiled oil offshore on tankers, Goldman Sachs analyst Damien Courvalin wrote in a report e-mailed Tuesday. If output climbs by 200,000 barrels a day in the first quarter and oil in floating storage is offloaded, that may add about 50 million barrels to global inventories.
OPEC forecast a steeper drop in supplies from rival producers this year as prices slump. Output outside the group will fall by 660,000 barrels a day, the group said Monday in its monthly market report, deepening the decline from its previous estimate by 270,000 barrels a day.
China boosted its oil refining to a record last year as it became a net fuel exporter for the first time. The world’s second-largest consumer raised processing by 3.8 percent to 522 million metric tons in 2015, or about 10.48 million barrels a day, according to to data released by the National Bureau of Statistics on Tuesday.
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