Gold Silver Reports – Oil fell, erasing an earlier gain, as a global glut outweighed an increase in tension between Saudi Arabia and Iran.
The Saudi government cut ties with Iran following an attack on its embassy in Tehran by demonstrators protesting the execution of a prominent Shiite cleric. Prices last week capped the biggest two-year loss on record amid speculation a global glut will be prolonged as U.S. crude stockpiles expanded and the Organization of Petroleum Exporting Countries abandoned output limits.
“The geopolitical risk is a little overstated,” said Gene McGillian, a senior analyst at Tradition Energy in Stamford, Connecticut. “The market is focusing on weak fundamentals. The supply glut is outweighing the geopolitical tension.”
The Middle East accounted for about 30 percent of global oil output in 2014, according to the U.S. Energy Information Administration. Iran and Saudi Arabia sit on either side of the Persian Gulf, the site of the world’s biggest concentration of oil tankers.
West Texas Intermediate for February delivery fell 28 cents, or 0.8 percent, to end at $36.76 a barrel on the New York Mercantile Exchange. Brent for February settlement slipped 6 cents to $37.22 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude was at a premium of 46 cents to WTI.
Crude inventories at Cushing, Oklahoma, the delivery point for WTI futures, rose to 63 million barrels in the week ended Dec. 25, a record high, according to the Energy Information Administration. Domestic production climbed for a third week to 9.2 million barrels a day.
“We are still facing extra supplies,” McGillian said. “There’s going to be some downward pressure on the market.”
Saudi Arabia and Iran are on opposite sides of Middle East conflicts from Syria to Yemen. The current crisis is the worst between the two regional powers since the late 1980s, when the Sunni-led kingdom suspended ties with Shiite-ruled Iran after its embassy was attacked following the death of Iranian pilgrims during Hajj in Mecca.
“There are potentials for a lot of disruptions in terms of oil supplies,” said Carl Larry, head of oil and gas for Frost & Sullivan LP in Houston. “Oil could easily go up above $50 if the confrontation escalates.”
Saudi Arabia produced 10.25 million barrels of oil a day in December, helping to keep daily OPEC output above 32 million barrels for a seventh month, according to data compiled by Bloomberg. Iran pumped 2.7 million barrels a day and is seeking to boost exports once international sanctions are lifted.
Iran will raise exports by 500,000 barrels a day within a week of sanctions being removed, said Oil Minister Bijan Namdar Zanganeh, according to the official Islamic Republic News Agency. The country will add another 500,000 barrels a day in a second phase within six months after the curbs end, he said.
At the mouth of the Persian Gulf is the Strait of Hormuz, the world’s most important choke point for oil shipments, with about 17 million barrels of crude passing through daily, according to the EIA. – Neal Bhai Reports
2 thoughts on “Global Glut As Crude Oil Declines”
Keep a stop of 7760 on closing basis…Buy NF in small lots
Now at 7802…Eat profit where u like …Laxman Rekha t 7855
Buy KAVERI Seeds at 377….small lots in panic too buy upto 368-367
RED ALERT–Stop of 1472…Sell APOLLO HOSPITAL…Now at 1452….Below 1445…if trades for 10 minutes watch BLOOOOODBATH…….of life