Brent crude dropped to a new 12-year low Thursday as the prospect of more oil supplies from Iran loomed, amid gloom over a world already awash with supply and concerns about global economic growth.
The global benchmark LCOc1 dropped as far as $29.73, the lowest since February 2004 and down more than 1.5 percent. After spending most of the Asian trading day in negative territory, it was up 17 cents at $30.48 a barrel at 0730 GMT (0230 ET).
West Texas Intermediate (WTI) CLc1 was up 43 cents at $30.91 after falling earlier in the day.
U.S. oil is trading at a rare premium to Brent, reflecting the hit that the global benchmark is taking with potentially more crude from Iran flowing as sanctions imposed on the country for its nuclear program may be lifted as early as Friday.
It was the second time in two days for Brent to drop below $30 a barrel after WTI fell below that mark on Tuesday, before recouping some of the losses.
“Perhaps $30 or just slightly below is acting as a little bit of a floor, but that being said that’s a straw in a hay barn in terms of positivity,” said Ben le Brun, market analyst at OptionsXpress in Sydney.
“The rest of the news is decidedly negative about oil,” he said, pointing to bearish official figures on U.S. stockpiles.
Data showing that crude inventories USOILC=ECI rose 234,000 barrels last week, much less than expectations, was overshadowed by reported builds of 8.4 million barrels in gasoline USOILG=ECI and over 6 million in distillates, which includes diesel and heating oil USOILD=ECI. <EIA/S>
The United Nations’ nuclear watchdog is likely to confirm on Friday that Iran has curtailed its nuclear program as agreed with world powers, paving the way for sanctions to be lifted.
“Iran’s return is likely to come sooner,” Barclays said in a research note on Thursday. “Non-OPEC supply ex-US is lower, though the adjustments are not nearly steep enough to rebalance given the worsening demand outlook and higher OPEC supply.”
Iran also released 10 U.S. sailors on Wednesday after holding them overnight, bringing a swift end to an incident that had rattled nerves ahead of the expected implementation of the nuclear deal.
Oil and gas projects worth $380 billion have now been postponed or canceled since 2014 as companies slash costs to survive the oil price crash, including $170 billion of projects planned between 2016 and 2020, according to a new report from energy consultancy Wood Mackenzie.
The price crash “intensifies the squeeze on working capital and makes effective cash management all the more important,” said Lance Kawaguchi, managing director and global sector head for energy and resources at HSBC.