Oil price dropped below $35 a barrel for the first time since the financial crisis in 2008 as Iran says that it would continue to boost oil exports, which worsen the concern about the oil glut.
The Iran says that there is “absolutely no chance” it will delay a boost of its oil export. WTI dropped as much as 2.7 percent to $34.67 a barrel at London time. It lost almost 11 percent last week. Brent crude also lost 3.4 percent to below $36.70 a barrel.
Oil also slumped last Friday as IEA, International Energy Agency, says that the supply glut will persist at least until late 2016 as demand growth slows and supply maintain a high level.
One concern is that the global surplus of oil. OPEC set an output quota and abandoned production limit at a Dec. 4 meeting. Organization of Petroleum Exporting Countries wants to keep their strategy to defend the market share by maintaining their oil output, even though the oil price fell down a lot. “Gloom nourishes gloom,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. “The market is fully acknowledging that OPEC is no longer in price-control mode or providing a floor, and that the group is unlikely to change that strategy any time soon.”
Another concern comes from China. China is the world’s biggest importer of crude oil. China’s economic slowdown decreases the demand for all kinds of commodities. China’s official purchasing managers index fell to 49.6 in November, the lowest level since 2012. The import of China fell for a 13thstraight month. The Bloomberg World Energy Index is heading for its third weekly drop, its worst since August.
What’s more, Federal Reserve interest rate decision is getting closer. Although people know that the probability of raising rate is high, investors are still cautious about that. Speculators in the U.S. have raised bearish bets on oil to an all-time high. So the investors may just follow the market move. It may not have a big turnaround in the short time.