4th August 2015
After a five per cent fall in the previous session, oil prices regained a small patch of ground on Tuesday, but hopes of a bigger recovery have been dashed by data that indicates bigger declines are on the horizon.
New figures demonstrate that oil output by the Organization of the Petroleum Exporting Countries (OPEC) surged to its highest monthly level in July. In addition, Iran is poised to produce as much as 500,000 barrels per day (bpd), as soon as international sanctions are lifted.
Prices have also been dampened because US production of oil is hovering close to record highs and China's economy continues to show signs of a slowdown.
On Monday, values were forced down to a touch above the six-year lows witnessed at the beginning of 2015, while Brent crude dropped to below $50 for the first time since January. Over the last ten years, it has rarely fallen below this mark.
Despite prices rising today, with Brent climbing to $49.87 and US crude reaching $45.64, analysts are expecting values to fall further in the near future.
A strong US dollar coupled with China's slowing economy and the potential for oil exports out of Iran to grow would pile the pressure on prices in the next few months, pushing them further down, according to BMI Research.
Reuters reports that the firm noted: "A retest of Brent crude's 2015 low around $45 per barrel looks inevitable given current ample market supply and intensifying bearish market sentiment toward prices."
It added that it expected prices for next year to be slightly higher than this year, as values need to push past the $60 a barrel mark for US shale oil drillers to turn a profit.
The idea that the problem will just resolve itself could fail to come to fruition, according to ANZ Bank, as consumers may start to look to save money rather than spend it.
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