The oil rebound witnessed yesterday was a bit short-lived as Iran is all set to pump in more supply to the global oil market, which will eventually add to the supply glut.
Brent crude breached the $30 level today, now trading at around $29.75, and close to clicking a weekly loss of over 10%. Meanwhile, U.S. crude is doing even worse than Brent as it registered a 5.35% fall to the $29.50 level.
The spectacular oil rout continues to haunt investors, many of whom are seeing negative developments from around the world, particularly China. As OPEC has already ruled out any production cuts to defend its competition, the latest blow to rebound expectations is coming from the Persian Gulf. Iran could start adding supplies of oil by as early as next week following the lifting of Western-imposed sanctions.
The Islamic Republic is committed to swinging back to its pre-sanction oil production levels, with fears that Tehran will pump an additional 500,000 barrels per day. Events have many experts now openly predicting $20 oil.
Dollar Weakens
Meanwhile, the U.S. dollar surprisingly traded lower in the face of the oil rout, which is strengthening the demand for other safe bets such as the yen and Swiss franc as opposed to the dollar. The U.S. dollar index, which assesses the currency’s degree of strength against the basket of six global currencies, slipped 0.20% to 98.92.
The euro showed some weakness on Thursday after the European Central Bank released minutes of its meeting held in December. The minutes indicated that few of the members of the governing council support a higher cut to the deposit rate than was actually announced.
Also as per the minutes, it is likely that monthly asset purchases will be raised from the current level of €60 billion under the ECB’s quantitative easing program.