And it Begins - The bottom is ArrivingNow we bump along the bottom for a while as this supply-side bear market in oil (again, thanks to KeithR for the Goldmans site - very informative) continues to readjust. As suggested earlier - from the Wall Street Journal
Oil Back Above $30 a Barrel as Iran Worries Seen as Overdone
Analysts see shake-up as low price pushes out high-cost producers and balances oversupplied market
By
Miriam Malek
Updated Jan. 19, 2016 7:51 a.m. ET
Oil markets climbed back above $30 per barrel on Tuesday, gaining alongside a broad-based markets rally and as investors concluded that recent concern over new Iranian oil had been overdone.
The global crude benchmark Brent was up 5.39% at $30.09 a barrel on London’s ICE Futures Europe for March loading. West Texas Intermediate was up 2.55% at $30.17 for February deliveries.
The gains came despite a bearish report from a top world energy monitor predicting that the market faces an “enormous strain” on its ability this year to absorb new supplies from producers like Iran.
Oil prices have been trading below $30 per barrel since January 15, sending a bearish signal that helped provoke falls in equity markets. On Monday, Brent hit its lowest level in 12 years as traders sold on the lifting of sanctions that could see Iran release its promised 500,000 barrels of oil into an oversupplied crude market.
On Tuesday, investors and some analysts were taking a less pessimistic view on Iran.
“We are coming off extremely oversold levels,” said Amrita Sen, chief analysts at Energy Aspects, a London research house.
“The gains today showed yesterday was an overreaction and the market is correcting itself,” she said.
Markets were rallying across the board on Tuesday, with Asian and European shares lifting off recent lows. That came after China’s 6.9% annual growth rate seemed to offer relief to investors, some of whom had feared worse, and many expect Beijing may do more to stimulate its economy. Sentiment in oil markets has often been hurt by falls in Asian equity, as investors question economic growth, and so demand, in the region.
A softer dollar also supported oil prices on Tuesday. The Wall Street Journal Dollar Index, which tracks the greenback against a basket of other currencies, fell 0.12% on Monday. As oil is priced in dollars, it becomes more attractive for holders of other currencies as the greenback falls.