Oil plunges into the $20s a barrel on Iran supply woes
London (Jan 15) Oil prices slumped on Friday and broke below the key $30-a-barrel level, as concerns about Iranian supplies adding to a global surplus kept the market under pressure.
Crude oil CLG6, -5.58% dropped $1.76, or 5.6%, to $29.47 a barrel, setting it track for the lowest closing level since late 2003. Brent oil LCOH6, -4.44% lost $1.40, or 4.5%, to $29.48 a barrel.
Investment sentiment has weakened as international sanctions against Tehran’s nuclear program could be lifted as soon as this weekend, which is likely to lead to a gush of Iranian oil exports.
“The oil supply glut in juxtaposition with the lessening demand is wholly more difficult to contain and with Iran set further to increase volumes following the lift of sanctions, the trend remains to the downside,” said Brenda Kelly, head analyst at London Capital Group, in a note.
Read: Oil at $10 a barrel — maybe even under $0?
Iranian Oil Minister Bijan Namdar Zanganeh has pledged to boost output by 0.5 million barrel per day within weeks of the end of sanctions and by the same amount again in six months, according to an ANZ report.
The rising conflict between Iran and Saudi Arabia over the execution of a Muslim cleric is another reason for bearishness in the oil market, said AZN analyst Daniel Hynes.
He said there was a possibility of an agreement being reached between the two nations on regulating their oil production before the conflict arose, but now such a pact is unlikely to be reached and the two large producers may end up undercutting each other by pushing crude oil into world markets.
Elsewhere in the energy market, natural gas NGG16, -1.64% lost 1.4% to $2.11 per million British thermal units, while gasoline RBG6, -2.99% lost 2.8% to $1.04 a gallon.