Crude oil prices edged up in early Asian trading on Tuesday following a sharp 5 per cent drop in the previous session, as high global production and a weakening economic outlook, especially in Asia, prompted analysts to warn of further falls.
Oil output by the Organization of Petroleum Exporting Countries (OPEC) reached the highest monthly level in recent history in July, and production could rise further if Iran achieves a plan to raise output by 500,000 barrels per day (bpd) as soon as sanctions are lifted.
With US production also near records and China’s economy showing further signs of slowing, prices on Monday were pulled down to within a few dollars of the six-year lows touched at the start of the year. Brent fell below $50 per barrel for the first time since January
Although prices rose on Tuesday, with Brent 28 cents higher at $49.80 a barrel by 0336 GMT and US crude up 35 cents at $45.52 a barrel, analysts said more falls were expected.
BMI Research said a strong US dollar, China’s weakening economy, and the prospect of rising Iranian oil exports would keep downward pressure on prices in the coming months.
“A retest of Brent crude’s 2015 low around $45 per barrel looks inevitable given current ample market supply and intensifying bearish market sentiment towards prices,’’ the firm said, although it added that it expected modestly higher prices in 2016 as prices above $60 a barrel were needed for most US shale oil drillers to be profitable.