Biggest monthly fall in oil prices since 2008 financial crisis

Global oil glut continues to drag down oil prices as data shows OPEC exceeding output for July, while weak Chinese data signals sluggish demand for oil

Photo by: AFP
Photo by: AFP

The non strategic planning of oil output by the Organization of the Petroleum Exporting Countries (OPEC) has caused a wave of worry amongst investors, with Iran vowing to make a grand comeback to the oil market once sanctions are lifted. In addition, the slowing of China’s manufacturing sector led crude prices to hit a six month low.

While Saudi Arabia continues to wage war on global oil prices in order to defend its market share, Iran is expected to pump as much as 500,000 barrels per day (bpd) as soon as sanctions are removed, according to a statement from Iranian Oil Minister Bijan Zanganeh.

Iran is set to soon be free from the tough sanctions which have been choking its economy, after reaching a historic deal with six world powers in mid July over its nuclear program.

Meanwhile, the increasing number of oil drillers adding to the US rig count last week weakened investor sentiment further as the oversupply of oil across the globe is not expected to decline anytime soon.

Official survey data also indicated a negative trend in China’s demand for oil. The country is the world's second largest oil consumer, and its Purchasing Managers' Index (PMI), a key indicator of economic growth, fell to its lowest in five months in July, an official survey showed on Saturday.

Brent crude fell $1.10 to trade at $51.11 per barrel, while US crude lost around 86 cents to $46.26 per barrel on Monday morning. Crude prices have fallen close to 20 percent so far in the third quarter, marking the biggest monthly fall since the global financial meltdown in 2008.

According to the World Bank’s updated commodity price forecast, oil is predicted to be priced at $57.50 per barrel on average in 2015 and by 2020 is expected to reach $71.90 per barrel.

TRTWorld and agencies