Brent oil futures extended its losses to test a fresh low of below $30 a barrel. The level marks the
commodity’s new 12-year low today, further fuelling the global oversupply concerns. On London’s
ICE Futures Exchange, Brent oil for March delivery made a day’s low at $29.70, a barrel, a level last
seen in January 2004. However, the commodity futures recovered slightly to $30.44.
Analyst speak
Brent futures traded on London exchange have dropped 19% in 2016 on the back of worries that
the oil supply glut will continue to haunt for a longer time than anticipated. Also, the supply glut
situation can worsen if Iran will join the global oil market after being released from western
imposed sanctions. According to analysts, Iran has the capacity to add up to 500,000 barrels to the
oil production, which can further send the prices deep red.
Meanwhile, the world has been seeing global oil production outpacing the overall demand after
the supply ramped up in the U.S. shale oil combined with the decision of the Organisation of the
Petroleum Exporting Countries (OPEC) to continue with the existing production to maintain
market share, thereby ruling out any supply cut. If analysts are to be believed, then the supply
situation is set to worsen as oil production continues to accelerate in Saudi Arabia, North America
and Russia.
U.S. crude showing improvement
On the New York Mercantile Exchange (NYMEX), February crude oil was trading at $30.80, up
1.05%. The oil futures settled at $30.48, up by 4 cents during the previous trading session. A
weekly report issued by the U.S. Energy Information Administration showed a sharp rise in both
gasoline and distillate supplies over the last week, implying sluggish demand for oil.
U.S. crude has been showing some revival signs in comparison to Brent following the Congress’
recent decision to lift a ban on oil exports, signalling to improved oil market conditions in the
coming months.