Continual concerns of rising supplies from the US and OPEC have seen Brent crude oil fall for the third straight week in a row to under $54 a barrel.
Intensive efforts to finalize a deal between Iran and world leaders over Iran’s nuclear program have only fed concerns that freeing up it’s oil exports would put more pressure on the market.
US crude for April delivery has fallen 65 cents to $43.31 a barrel and is headed for its fifth weekly loss.
Brent for May delivery is not much better, with a decline of 71 cents to $53.72 as of Friday. The contract is expected to add an additional 1.5 percent decline this week. The contract expires on Friday.
On Thursday, Kuwait’s oil minister said that OPEC had no choice but to ignore the oil output cuts.
Eugene Weinberg, Commerzbank’s head of commodities research, explains, “Oil has been under pressure following remarks by Kuwait’s oil minister and the very slim chance of an approaching deal with Iran.
“Continuously high OPEC supplies, rising U.S. production and inventories” meant the market was still looking for a floor, he said, adding he “wouldn’t be surprised” if the current month contract dropped to around $50 in coming weeks.
Foreign ministers from France, Germany and Britain are set to meet with negotiators from the Iranian nuclear program on Saturday in hopes of resolving the confrontation.
A resolution could lead to an easing of sanctions that are currently restricting oil exports to around one million barrels per day, which could then flood the market even further. However, according to Amrita Sen, chief oil analyst at London-based consultancy Energy Aspects, it’s unlikely that Iran will be able to raise oil supplies in short-term.
Sen says that the recent strengthening of the US dollar against other currencies has also had an impact of the demand of dollar-priced assets.
Analysts at Bank of America Merrill Lynch believe oil prices are unlikely to recover in the near term and will average $52 a barrel in 2015 and $58 a barrel in 2016.
“This combination of a stronger dollar, a slowing China, and falling commodity prices is not going away any time soon. As the money runs dry and governance issues across emerging markets spring up, expect global oil demand to stay soft,” BAML said.