Oil prices drop further

 03 May 2016 - 14:37

Oil prices drop further

London: Oil prices lost more ground Tuesday as nagging worries about excess supplies kept them below 2016 highs after data showed Iran and Iraq increasing output.

So-called black gold has rallied for four straight weeks thanks to a weaker dollar and hopes that the world economy is slowly turning positive.

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.

At about 1000 GMT on Tuesday, US benchmark West Texas Intermediate (WTI) for delivery in June shed 18 cents to $45.65 per barrel. 

Brent North Sea crude for July sagged 37 cents to $44.74 a barrel compared with Monday's close.

"Fundamentally, there are no changes (in the supply and demand balance). In fact the situation seems to be getting worse," said analyst Bernard Aw at traders IG.

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 the Petroleum Exporting Countries takes firm action to ease the oversupply during its twice-yearly meeting next month.

CMC Markets analyst Margaret Yang said in a note that Iran's oil production was likely to hit 4.0 million barrels a day by next month. Iran 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.

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.