Oil Prices Hit Lowest Levels Since 2003

New York, 11 Rabiul Akhir 1437/21 January 2016 (MINA) – Oil prices plunged to their lowest levels in almost 13 years Wednesday helped by bearish sentiment caused by a supply glut, a stronger dollar and Iran’s return to the oil market.

The international benchmark Brent crude oil for March delivery traded as low as $27.45 per barrel on London’s ICE Futures exchange before 17.00GMT while the U.S. West Texas Intermediate’s February futures fell below $27 per barrel around 1630GMT to reach $26.85 a barrel. Both benchmarks are at their lowest levels since 2003, Mi’raj Islamic News Agency (MINA) reported, quoting Anadolu Agency.

The U.S and EU imposed sanctions on Iran were lifted Jan. 16, allowing the energy-rich country to increase its crude oil exports by 1 million barrels per day within the next six months, as Tehran has repeatedly noted last year.

In addition, Iran has approximately 30 million barrels of oil stored offshore in vessels, ready to hit the global market, adding to a saturated market.

Contributing to the low commodity price is the U.S. Federal Reserve interest rate hike on Dec. 16 that strengthened the dollar against other currencies, creating downward pressure on global crude demand.

As oil prices are indexed to the value of the greenback, the end of quantitative easing in the U.S. and possible more rate hikes signaled by the Fed have increased the value of the dollar, which in turn lowered purchasing power and crude demand of oil importing countries around the world.

The slowdown of the Chinese economy has also placed downward pressure on oil prices.

The world’s second biggest economy grew by just 6.9 percent in 2015, marking its slowest pace in the past 25 years.

The slow economic growth rate for the world’s second largest oil consumer increases expectations in the oil market that China’s crude demand is in decline, bringing down global crude demand and pushing prices lower.

But there was encouraging news from China. Preliminary data shows its demand for crude rose 2.5 percent in 2015, compared to the previous year.

While OPEC refuses to trim output, Russia is pumping at record post-Soviet levels and U.S. shale producers proved their resilience against low prices, the glut is expected to remain in the market through at least the first half of 2016.

Crude prices have fallen around 27 percent since the beginning of this year and around a 77 percent decline since reaching $115 per barrel in June 2014. (T/P010/R03)

Mi’raj Islamic News Agency (MINA)