European oil extended its decline below $28 a barrel after international sanctions on Iran were lifted, paving the way for increased exports from the OPEC producer amid a global glut.
Futures lost as much as 4.1 percent in London after slipping 13.7 percent last week. Iran is beginning efforts to boost productionand exports by 500,000 barrels a day immediately after the lifting of penalties, Amir Hossein Zamaninia, deputy oil minister for commerce and international affairs, said Sunday in an interview in Tehran.
Saudi Oil Minister Ali al-Naimi said crude prices will rise and that market forces and cooperation among producing nations will lead eventually to renewed stability.
Oil capped a third annual loss in 2015 as the Organization of Petroleum Exporting Countries effectively abandoned output limits amid a global surplus. Iran is trying to regain its lost market share and doesn’t intend to pressure prices with an export increase, officials from its petroleum ministry and national oil company said this month.
“Iran’s additional crude shipments have the potential to further depress prices, perhaps to as low as $25 a barrel,” Gordon Kwan, a Hong Kong-based analyst at Nomura Holdings Inc., said by e-mail Sunday.
Brent for March settlement lost as much as $1.18 to $27.76 a barrel on the London-based ICE Futures Europe exchange and was at $27.88 at 7:22 a.m. Hong Kong time. The contract dropped $1.94, or 6.3 percent, to $28.94 on Friday. The European benchmark crude was at a discount of $1.70 to West Texas Intermediate for March.
WTI for February delivery fell as much as 85 cents, or 2.9 percent, to $28.57 a barrel in electronic trading on the New York Mercantile Exchange. The contract slid $1.78 to $29.42 on Friday. Total volume traded was more than double the 100-day average. Prices have lost 23 percent this year.
Iran will probably start increasing exports by selling barrels it stockpiled on tankers in the Persian Gulf in anticipation of the deal. About 18 Iranian tankers are holding 12 million barrels of crude and 24 million barrels of condensates, according to the International Energy Agency.