Azernews.Az

By Nigar Abbasova

World oil prices have resumed a slump on August 29, amid rise of output in Iraq and strengthening of pessimistic expectations on the possible output freeze in the forthcoming Algeria meeting.

Brent crude was 70 cents, or 1.4 percent, lower at $49.22 a barrel at 7:34 a.m. ET (1134 GMT). The global benchmark is down more than 6 percent from its 2016 peak of $52.86 reached on June 9. U.S. crude was down 65 cents, or 1.4 percent, at $46.99, Reuters reported.

The price of a barrel of Azeri Light crude oil increased $0.91 to stand at $50.72 on the world markets.

Traders said the price fall is a result of climbing output from the Middle East, where oil exports from Iraq's (OPEC’s fourth oil producer for the volume of its proven crude oil reserves) southern ports have averaged 3.205 million barrels per day (bpd) in August, exceeding the average level seen in July, according to two officials from the state-run South Oil Company. Exports in July averaged 3.202 million bpd.

Iraq’s new Oil Minister Jabbar Al-Luaibi has recently asked the multinational corporations extracting oil on Iraqi lands to increase output.

Meanwhile, Baghdad has not yet provided any information on whether Al-Luaibi will attend September meeting of OPEC and non-OPEC states or not.

The situation on the market was also triggered by a statement of the Iranian side. Tehran announced that it would only cooperate in the upcoming talks if fellow exporters recognize Iran’s right to fully regain market share.

Analysts said that disagreements within the Organization of the Petroleum Exporting Countries (OPEC), and especially its key members -- Saudi Arabia and Iran, undermine expectations of any positive impact on global output from the upcoming talks.

“There’s a lot of price uncertainty,” Robert Boslego, managing director of Boslego Risk Services in Santa Barbara, Calif, told the WST. “Oil inventories keep reaching new highs,” he said, adding that the big question whether OPEC members will intervene “if prices go back down to $40.”

Nevertheless, analysts say that the average price of Brent grade will stand at $61 per barrel mainly depending on the USD rates and the U.S. Federal Reserve System (FRS) decision on interest rates.

Barclays said that it saw "incoming oil market data (both demand and supply) as a source for price strength in the fourth quarter of 2016.

An increase in U.S. interest rates is expected to lift the dollar and positively influence oil prices as strong greenback makes fuel purchases more expensive for traders who conduct business in other currencies. Some economists say that the next hike could even come next month.

The central bank opted to keep rates between 0.25% and 0.5% for the fifth consecutive meeting in July, while the last time raise was fixed in December 2015, following a gap of a nearly a decade.

Moreover, Baker Hughes data on weekly U.S. drilling revealed that the number of rigs drilled for oil remained unchanged following eight straight weeks of increases. The total active U.S. rig count, which includes oil and natural-gas rigs fell by 2 and amounted to 489. Lack of additional rigs lessened concerns the global oversupply in the market is set to persist and push prices down.

--

Nigar Abbasova is AzerNews’ staff journalist, follow her on Twitter: @nigyar_abbasova

Follow us on Twitter @AzerNewsAz