Technical & Fundamental Oil Reports Specialists

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Oil prices move into the red zone

Published Tuesday, August 4th, 2015

Everything conspired to put further pressure on oil prices yesterday. Over the weekend the Iranian oil minister claimed that the day after sanctions are lifted his country will raise production by 500,000 bpd rising to +1 mbpd within months. Whether you believe him or not there can be no denying that in the meantime the other 11 OPEC members are pumping at manic levels, with Reuters reporting July production at 32 mbpd.

This is the highest level in a decade and we have to keep reminding ourselves that this level is being achieved with Iran and Libyan production shackled and capable of adding another 1.5 to 2 mbpd over the next 18 months. OPEC produced 32.6 mbpd in July 2008 but this included Indonesia, who are no longer a member, at 850,000 bpd.

It is also a bitter blow that the anticipated major source of demand growth, China, has lost momentum. The news that the Caixin/Markit final PMI for July was worse than the flash number coming in at 47.8 from 49.4 ensured that commodity markets had a very bad start to the week. Copper fell 1.5% to its weakest level in six years bringing the cumulative decline for the year to 27.5%.

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Posted by David Hufton