Oil Traders Looking For New Bottom

Crude oil headed to new lows on Wednesday morning falling 9 points to 42.98 after the weekly API report showed a significant increase in stocks following the July OPEC monthly report showed soaring production levels. OPEC pumped 31.5 million barrels per day (bpd) last month as Iran raised its production to 2.86 million bpd, the highest since international sanctions against the country were toughened in June 2012.

The return of Iranian oil to the market could make oil even cheaper than the current lows of about $49.50 a barrel.  Brent oil is down 50 cents at 49.37 as traders review yesterday’s data releases.

“According to secondary sources, total OPEC crude oil production averaged 31.51 million barrels per day in July, an increase of 101,000 barrels per day over the previous month. Crude oil output increased mostly from Iraq, Angola, Saudi Arabia and Iran, while production in Libya showed the largest drop,” OPEC said in its monthly report Tuesday.

Under the influence of top producer Saudi Arabia, the cartel, which produces more than 40 percent of the world’s oil, has refused to cut output. The Gulf kingdom has told OPEC it reduced its own production by 200,000 bpd to 10.36 million bpd in July.

The World Bank said Monday that when Iran completes its full return to the world oil market, the volume of oil sold will increase by about 1 million bpd. As a result, oil prices will decline next year by about $10 per barrel or approximately 21 percent from current levels, the World Bank said.

In June, OPEC officially maintained its production quota at 30 million bpd, but has been exceeding it in practice since then. The cartel is seeking to tackle competition from other global players, especially US shale oil producers.

Brent and WTI crude future prices fell sharply through July and into August as a result of the global oil surplus, rising inventories, and financial crises in Greece and China rippling through the European and Asian economies, and rising US crude stocks, OPEC said.

The anticipated relaxation of trade sanctions on Iran also pressured futures prices on the back of a likely increase in crude exports from the country in the near future, the cartel added. Brent and WTI futures fell from over $63/bbl. and $60/bbl. respectively in late June to under $45/bbl. and $50/bbl. respectively this week.