Oil steadies but outlook uncertain
London (Oct 20) Oil steadied on Tuesday as traders covered short positions after a week of falls, but the outlook was uncertain with the head of the world's biggest independent oil trader saying prices would struggle to recover much ground over the next year.
Brent crude dropped $1.85 a barrel, or 3.7 percent, on Monday and was unchanged at $48.61 by 0600 ET. U.S. crude was up 10 cents at $45.99 after closing down $1.37, or 3 percent. The U.S. front futures contract expires on Tuesday.
Ian Taylor, the chief executive of trading company Vitol, told the Reuters annual Commodities Summit that slowing oil demand growth and an increase in the volume of Iranian crude supply would help keep a lid on fuel prices.
"If we are above $60 by the end of 2016 I will be a little bit surprised," said Taylor, whose company handled more than 2 billion barrels of oil last year.
Major oil exporters in the Middle East are pumping around 2 million barrels per day (bpd) more crude oil than needed at the moment, analysts say, filling inventories around the world.
On top of this, Iran is expected to boost oil production when international sanctions are lifted after it implements the conditions of a nuclear deal agreed with major world powers.
A senior Iranian oil official said on Monday Tehran planned to increase crude production by 500,000 bpd within a week of the lifting of sanctions, selling the oil to traditional customers in Asia and Europe.
Taylor said he expected a battle for market share between Middle East oil exporters once sanctions were lifted on Iran.
"It will be difficult to place that (Iranian) oil," he said.
Investors are also worried about the world economy and its impact on oil demand as growth in China slows.
China's GDP growth slowed to 6.9 percent in the third quarter, down on a 7-percent rise in the prior quarter, while implied oil demand was also lower, official figures and Reuters data on Monday showed.
Industry group the American Petroleum Institute (API) will report its stocks data later on Tuesday, while the U.S. government's Energy Information Administration (EIA) will release oil inventory data on Wednesday.
U.S. commercial crude oil stockpiles are expected to have risen last week for the fourth consecutive week, a Reuters survey showed. [EIA/S]