Oil at fresh 12-year lows on China, Iran fears

Oil futures cratered again on Friday despite predictions earlier in the week that crude prices would recover sharply in the back half of 2016, amid worries about China and the return of Iranian oil exports.

Some market commentary ascribed the downdraft in the oil patch mainly to news that China’s central bank had pumped $15bn into the country’s financial system on Friday through a medium-term lending facility, in a bid to maintain liquidity in the country’s banking system.

That headline prompted renewed warnings from some analysts about global deflationary pressures and the risk of further losses in global stockmarkets.

As of 13:55GMT front month Brent crude futures were trading 4.6% lower to $29.52 per barrel on the ICE, while West Texas Intermediate was lower by 4.84% to $29.70 – a fresh 12-year low.

Three-month copper futures were also weaker in LME trading, having fallen 1.1% to $4,320.25 per metric tonne as of 13:30GMT.

Possibly adding to oil’s woes, there was speculation that the International Atomic Energy Agency might pave the way as soon as Friday for nuclear sanctions on Iran to be lifted next week.

“Earlier today both WTI and Brent simultaneously crashed below $30 per barrel. […] The break triggered a flood of stop-loss selling which sent oil even lower. The prospect of Iranian output hitting the already over-supplied markets was blamed for the move. But investors have known about the removal of sanctions for months.

“It’s worth noting that lower energy prices are a symptom not just of oversupply, but also of falling demand. There are fears that Chinese economic growth is slowing more sharply than previously thought,” said SpreadCo’s David Morrison.

“There are growing fears of mass bankruptcies for US shale oil producers.”

In parallel, futures on the Dow Jones Industrials Average were pointing to a more than 400-point drop at the start of trading, with the Footsie mimicking the move with 122 point drop to 5,796.36.

Over the previous two days, billionaire Harold Hamm, who made his fortune thanks to the shale oil revolution, predicted on different media outlets that crude oil prices would double by the end of 2016, to about $60 per barrel.

Intriguingly, CNBC reported that as recently as 11 January Berkshire Hathaway, Warren Buffet’s famed investment vehicle, extended its purchases of stock in energy refiner and distributor Philip 66 into a sixth day, picking up about $400m in shares.