Oil market falls sharply
04 May 2016 - 0:00
London: World oil prices sank by about one dollar on Tuesday, as supply glut woes grew on the back of rising output from Iran and Iraq.
At about 1615 GMT, US benchmark West Texas Intermediate (WTI) for delivery in June lost $1.35 to $43.43 per barrel.
Brent North Sea crude for July delivery shed 95 cents to $44.88 a barrel compared with Monday's close.
"This may be a dreaded month for the equity market investors ... but crude oil is having an equally frightening start too," said City Index analyst Fawad Razaqzada.
"Oil prices have also been absorbing a lot of negative news lately -- and completely ignoring the fact the markets remain oversupplied with US crude oil inventories being at record-high levels.
"The pressure for a squeeze was building anyway. Iran is continuing to increase oil output following an end to its sanctions in January; Saudi Arabia, unwilling to lose market share to Iran, produces near record levels, and Iraqi oil production is at 30-year highs."
So-called black gold has rallied for the last four weeks thanks to a weaker dollar and hopes that the world economy is slowly turning positive. A faltering greenback makes dollar-priced crude cheaper for buyers using stronger currencies, which tends to stimulate demand and prices.
However, the oil market fell Monday as figures showed Iraqi exports hit a near-record 3.36 million barrels a day in April, while Iran's production reached 3.5 million barrels per day, the most since December 2011.
Adding to demand concerns, data showed factory activity in world number two economy China slowed in April, leading to fears that a recent series of upbeat indicators may have been a blip.
"Fundamentally, there are no changes (in the supply and demand balance). In fact the situation seems to be getting worse," added IG analyst Bernard Aw.
He said that while the recent rebound seemed "intact", it would be a challenge for prices to return to $50 a barrel unless the Organization of Petroleum Exporting Countries (OPEC) takes firm action to ease the oversupply during its twice-yearly meeting next month.
CMC Markets analyst Margaret Yang said Iran's oil production was likely to hit 4.0 million barrels a day by next month.
The Islamic republic has been ratcheting up its production since Western sanctions were lifted in January following a deal over its nuclear programme.
"Nonetheless, expectation has been gradually building that an agreement will eventually be reached at June's OPEC meeting, as low oil prices are hurting all the OPEC members," she said in a note to clients.
A meeting last month involving OPEC and non-OPEC producers and aimed at freezing output collapsed without a deal.
Traders will also eye the release of US stockpiles data Wednesday to gauge demand in the world's top oil-consuming economy.