16th March 2015
The trend of weaker oil has returned after US crude hit a six-year low and Brent touched its lowest in a month.
A strong US dollar has been a significant factor for the renewed decline, with underlying fundamentals exacerbating negative sentiment.
WTI fell to its lowest since March 2009 in early trading on Monday, after falling to just above $43.50 per barrel. Brent crude also declined to a month-low, touching levels below $54 per barrel.
Oil inventories continue to swell and is heightening oversupply fears. Data indicates that the global supply glut will be prolonged, especially since there are potential signs that more oil exports could be delivered from Iran.
According to SocGen estimates, the world’s stockpiles are growing at a rate of 1.6 million barrels per day. Furthermore, the French bank predicts the rate will accelerate in the second quarter of the year.
Any increase in Iranian production or exports of oil could force the price lower again. This concern, combined with a strong dollar and underlying factors, point towards a drawn-out period of weakness in oil markets.
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