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Iran & US Rig Count Send Oil Prices Below $50

By:
Barry Norman
Updated: Aug 4, 2015, 04:18 UTC

Crude oil recovered 33 cents in the Asian session as traders took advantage of the steep declines to buy up the cheap commodity. WTI oil fell as low as

Iran & US Rig Count Send Oil Prices Below $50
Iran & US Rig Count Sends Oil Prices Below $50
Iran & US Rig Count Sends Oil Prices Below $50

Crude oil recovered 33 cents in the Asian session as traders took advantage of the steep declines to buy up the cheap commodity. WTI oil fell as low as 45.17 and is trading at 45.50 this morning. Brent oil did not do as well as crude, as it gained 24 cents to trade at 49.79 as traders remain surprised that Brent oil actually broke below its support level at $50.

Oil prices have tumbled more than 50 per cent since last summer, and Monday crude oil futures dropped 4.1 per cent. Energy companies in the S&P 500 were the biggest decliners in the index, falling 2 per cent. Oil majors Chevron and Exxon Mobil, which led declines in the Dow industrials Friday, continued to drag the market lower, falling 3.4 per cent and 1.5 per cent, respectively.

“It’s the big crude and oil and commodity-based complex that’s dragging the market lower,” Bill Nichols, head of US equities at Cantor Fitzgerald, said. On the other hand, more defensive stocks, or stocks such as utilities and real-estate investment trusts that pay dividends and have bond-like characteristics, traded higher.

oil prices

Economic data drove stock and commodities around the world. In Asia, equities dropped after a gauge of Chinese factory-floor activity slumped to a two-year low and commodity prices continued to fall.

Iran said it will be able to increase its production of crude oil to pre-sanctions levels – by 500,000 barrels per day within a week of sanctions being lifted, and by more than 1 million barrels per day within a month, Oil Minister Bijan Zanganeh says.

“Some of the most effective sanctions with regards to the oil industry were those that targeted aspects such as sales, volumes, shipment, insurance and the transfer of money,” the minister said the night of July 1 on Iranian state television. “If those issues are resolved, Iran will regain the market share that it has lost which amounts to above 1 million barrels per day.”

Zanganeh said Iran’s government already has informed OPEC about its decision to regain its status as a major global oil exporter, which it enjoyed before the sanctions, and declared that Tehran needs “nobody’s authorization to retrieve its rights.”

iran production

OPEC’s decision to maintain production levels came at its semiannual meeting in Vienna in November, and was kept at that level at its next meeting in June. Second, Iran’s determination to ramp up production once the sanctions are lifted, probably in early 2016, means that price relief may be at least a year away, maybe further.

Zanganeh said it was “unfair” to blame Iran for keeping oil prices low. He pointed to OPEC’s decision not to cut output and the group’s move to overproduce by at least 1 million barrels per day.

The conventional wisdom around sinking oil prices earlier in the year was that Saudi Arabia was flooding the market as a challenge to insurgent US shale producers. The gambit worked, and prices stabilized as American drillers shut down their oil rigs and slowed their oil exploration. Not only are those drillers turning their rigs back on, but Iran, the sleeping oil giant, is kicking into gear after striking a deal over its nuclear capabilities.

oil prices tues

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