Brent crude resumes sell-off as Iranians says oversupply, rather than a new Middle East war, is the biggest threat to prices. Brent crude has slumped to a fresh 11-year low as the world’s record oil supply glut weighs on traders.
The sell-off resumed after escalating tensions between Iran and Saudi Arabia – two of the world’s biggest rival producers – saw Brent spike briefly in Monday trading.
But traders shrugged off the prospect of a new bout of geopolitical risk in the Middle East. West Texas Intermediate – the US benchmark – also declined 1.5pc to $35.44.
An Iranian official from Opec – the world’s oil cartel – said tensions with its Sunni rival would only have a short-term impact on prices, claiming that oversupply remained the world’s “biggest threat”, according to the Sana news agency.
Oil has slumped by more than two-thirds since July 2014, when prices hit $115-per-barrel. The drop was precipitated by Opec’s decision to flood the world’s markets by maintaining production in the face of falling prices.
A new round of conflict between Iran and Saudi Arabia will make it even less likely the group will agree on a production ceiling when it next meets this summer. The cartel failed to come up with a formal limit on production for the first time in recent history at its December meeting last year.
Iran is likely to add to the world’s oil glut when western-imposed sanctions are lifted later in the year. The Islamic Republic will reportedly add an additional 500,000 barrels a day to the world’s supply within weeks of the restrictions being removed.
“There are rising stockpiles and the tension between Iran and Saudi Arabia make any deal on production unlikely,” said Michael Hewson, head of strategy at CMC Markets.