Oil dips on strong dollar, supply fears

oil-pricesWorld oil prices fell further Monday on a stronger dollar and concerns that a supply glut will worsen following a landmark deal which will allow Iran to increase its crude exports.

Brent North Sea crude for September delivery dropped 48 cents to $56.62 a barrel nearing midday London trade.

US benchmark West Texas Intermediate for delivery in August shed 17 cents to $50.72 a barrel compared with Friday’s close.

In foreign exchange deals, the dollar hit its lowest level since late May against the euro, as investors focused on the timing of a US interest rate increase.

The dollar had soared last week after US Federal Reserve chief Janet Yellen reaffirmed expectations of an interest rate hike by year-end.

A strong US currency makes dollar-priced oil more expensive, denting demand and leading to lower prices.

Lingering concerns about a return of Iranian oil to the international market kept up the pressure on prices.

Last week, WTI tumbled 4.0 percent and Brent retreated 3.0 percent after Iran and six world powers agreed a deal curbing Tehran’s nuclear programme that aims to prevent it building an atomic bomb.

In return, the West will lift crippling economic sanctions and allow Iran to ramp up crude exports in a market already awash with supplies.

“Although the landmark deal between Iran and the big six would increase crude oil supply only in the medium term, oil prices will remain weak in the near term as Iran starts to offload crude and condensate that it holds in floating storage,” said EY analyst Sanjeev Gupta.

Iran currently exports around a million barrels of crude per day, less than half the 2.2-2.3 million it sold overseas before sanctions were imposed in mid-2012, according to energy information provider Platts.

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