Both main contracts soared more than ten percent Friday on a report that the OPEC producers’ club was open to on output cuts that could ease the global oversupply and drag prices up from more than 12-year lows.
The news provided some much-needed relief to the beleaguered asset, which has lost about three-quarters of its value since mid-2014 owing to the supply woes, overproduction, weak demand and a slowing economy
However, another of the issues hanging over prices returned this week as Iran gets set to re-enter the market, after Western-imposed sanctions over its nuclear programme were lifted.
At 0410 GMT, US benchmark West Texas Intermediate for March delivery was 20 cents or 0.68 percent lower at $29.24, while Brent fell 17 cents or 0.51 percent to $33.19.
“After a massive rebound in oil prices of well over 10 percent, traders are looking to take some of those gains off the table,” said Bernard Aw, market strategist IG in Singapore.
“The truth of the matter is that the supply glut still looms in the backdrop, especially with news of Iran loading its first cargo to Europe since sanctions ended. Put differently, any rebound, particularly the scale of Friday’s rally, is still an opportunity to sell.”
Bloomberg News, quoting an Iranian oil ministry official, reported that a tanker for France’s Total SA was being loaded Sunday at Kharg Island while vessels chartered for Chinese and Spanish companies were due to arrive later in the day.
“Iran is going to add headwinds to the market,” David Lennox, an analyst at Fat Prophets in Sydney, said.
“We still have 500 million barrels of US inventories and shale producers are still pumping. Until there are significant cuts to output, the rally is not sustainable.”