Turkey- Price of oil drops close to seven year low

(MENAFN- The Journal Of Turkish Weekly) The price ofBrentoil held steadyat about$43per barrelMonday; however the bearish outlookremains strong in the oil market with the slowdown in theChinese economy and concerns over the glut of crude supply an analysttold Anadolu Agency.

The price of the global benchmarkBrentcrude oil openedat $44.36 per barrel butfell to $43.70a barrel around 9:30 a.m in Turkey [0730GMT]. It is nearlylowest price seen in seven years.

Last week the price ofBrentcrude fluctuated between $43-$45 per barrel.

Goldman Sachs analystMichele Della Vigna told the Today programon BBC's Radio 4 on Monday that oil could fall to as little as $20 per barrel. But there is only a15 percentprobability that this might happenhe said nor did he expect that extremely low price level to last for a long period.

The economic slowdown in China the world's second-largest economy and one of the most important importers ofcrude oilin the world is one factor making demand slack.

HoweverJulian Evans-Pritchard China economistin Capital Economics Singapore told Anadolu Agency thatthevolume of oil imports has risen in China as refineries are taking advantage of low prices to stockpile the commodity.

With that increase in quantity China's oil imports are down significantly in dollar terms Evans-Pritchard said.

However the slowdown in Chinese economy is forecast to continue in the long term Evans-Pritchard said.

Meanwhile crude oil inventories in the U.S. increased for an eighth straight week the U.S.' Energy Information Administration said last Wednesday.

Although the increase in U.S.crude stocks was smaller last week compared withthat ofprevious weeks the large amount of stock which stand at487.3million barrels is another factor contributing to the low price of oil.

Thomas Pugh acommodities economist atLondon-based Capital Economics said he remains hopeful thatdemand willpick up.

"Demand is growing strongly and inputs to refineries are also rising again which should help to eat away at the surplus oil in the market" he explainedin hisU.S. Weekly Petroleum Status Report lastWednesday.

Another factor that could push oil prices higher is the drop in number of oilrigs in the U.S. last week.

Data from oilfield services companyBaker Hughes last Friday showed that the number of U.S. oil rigs whichprovides an indication about the well-being of the oil sector in the country fell once again.

The oil rig count in the U.S. has declinedin11 weeks ofthe past three months while thetotal number ofoil rigsin the U.S. has fallenby 64percent since October 2014 when the rig countwasat itshighest level with 1609.

U.S. oil producers are waiting for prices to pick up in order to add more rigs. Domestic oil output in the U.S. has fallenby 500000 barrels perday (bpd)on average since April this year when production peaked at 9.6 million bpd.

Oil production from OPEC countries continues to add to the glut of supply in the market.

Although the cartel's official production quota is 30 million bpd the organization's total output reached31.4 million bpd in October.

Saudi Arabia and Iraq the two biggest oil producers of OPEC increased their output significantly fromlast year withproduction last monthat 10.2 million and 4 million bpd respectively.

The oil industryawaitsthebiannual meeting of the cartelthat will be held in Vienna on Dec. 4.

In its last two meetings OPEC refused to cut production in order to raisefalling oil prices. There are still no signs from Saudi Arabia Kuwait and the United Arab Emirates of any intention ofreducingoutput. These producershave made it clear that they feel reducing output would lead to a loss in market share.

In addition Iran is preparing to return to the oil market expectingsanctions on the country to belifted sometime early next year.

Tehran has repeatedly said it will increase its oil output by 500000 bpd immediately after the sanctions are lifted and by another 500000 bpd within the followingsix months.

This could increase the glut of supply in the oil market and pressureoil prices even lower.