Crude slumped below $50 a barrel in New York for the first time in more than three months on speculation that Iranian shipments will climb, extending a global glut.
West Texas Intermediate decreased as much as 1.9%. Iran will focus on regaining oil sales it lost due to sanctions regardless of the impact on prices, Oil Minister Bijan Namdar Zanganeh said in Tehran July 20. U.S. crude stockpiles remain almost 100 million barrels above the five-year average for this time of the year, Energy Information Administration data show.
“Once Iran increases output, $50 could easily become the ceiling for WTI,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by phone.
Oil’s recovery from a six-year low has faltered amid speculation the surplus will be prolonged as U.S. drillers return rigs to fields and Iran seeks to regain market share.
The prospect of increasing Iranian output may weigh on prices even if the gain is gradual, according to Barclays Plc.
West Texas Intermediate for August delivery fell 92 cents, or 1.8%, to $49.97 at midafternoon on the New York Mercantile Exchange. Futures touched $49.92, the lowest intraday price since April 6. The more-active September contract dropped 87 cents to $50.34. Total volume was 24% below the 100-day average for the time of day.
Brent for September settlement declined 59 cents, or 1%, to $56.51 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a $6.17 premium to September WTI.
Iran wants to pump almost 4 million barrels a day within seven months once sanctions are removed and 4.7 million as soon as possible after that, Oil Minister Zanganeh said at a press conference in Tehran.
Under the nuclear agreement Iran and six world powers reached in Vienna last week, the U.S. agreed to end efforts to limit Iran’s oil sales. The United Nations Security Council unanimously adopted a resolution endorsing the deal July 20. Iran had the second-biggest output in the Organization of Petroleum Exporting Countries before the European Union banned purchases of its crude in July 2012.
U.S. crude inventories remain almost 100 million barrels above the five-year average for this time of the year, data from the Energy Information Administration show. The EIA is projected to report on July 22 that crude oil, diesel and gasoline inventories climbed last week, according a Bloomberg survey of analysts.
Speculators cut bullish bets on WTI to the lowest level since March on the prospect for increased supply. Money managers reduced their net-long position in the oil by 15% in the week ended July 14, U.S. Commodity Futures Trading Commission data show. Conversely, funds raised their bullish stance on Brent in the same period by the most since April, according to data from ICE July 20.
