Oil rebounded on Thursday, snapping an eight-day rout, as investors covered short positions but the market settled not far from 12-year lows on worries Iran may add barrels to a glutted global market sooner than expected. Global crude benchmark Brent broke below $30 a barrel, its lowest since 2004, for a second straight day before rebounding.
It also settled off the day's highs, after the US State Department indicated a key Iranian nuclear reactor had been destroyed, as per conditions for lifting sanctions against Tehran's oil exports. "While the end of sanctions aren't finalised, we'll now be entering a world of even more supply," said Tariq Zahir at Tyche Capital Advisors in Long Island, New York.
"We feel the Saudis will pump even more and a price war between them and the Iranians will drive us well into the $20 levels. We are sellers of any and all rallies in days and weeks to come," said Zahir, an oil bear who mostly trades long-dated spreads in US crude.
Brent settled up 72 cents, or 2.4 percent, at $31.03 a barrel. Earlier in the session, it rose to $31.23 after falling to $29.73, its weakest since February 2004. Over the past eight sessions, Brent had lost about $7 a barrel, almost 20 percent. US crude's West Texas Intermediate (WTI) also settled up 72 cents, or 2.4 percent, at $31.20. It hit a 12-year low of $29.93 earlier this week. With options for WTI's front-month February futures expiring, traders were covering short positions.
"Natural covering interest is buoying the market as many had $30 as an objective," said Pete Donovan, broker at Liquidity Energy in New York. US State Department spokesman John Kirby said concrete has been poured into the central vessel of Iran's Arak nuclear reactor, a move critical to the implementation of a nuclear pact Tehran reached with major powers last year.
Secretary of State John Kerry said on Wednesday the core of the reactor had been removed. Iran expects the International Atomic Energy Agency to issue a "final" report on Friday, confirming it has met all obligations under the nuclear deal. Barclays, the U.K.-based bank, said it expects Iran to produce almost 700,000 barrels per day (bpd) more oil in the fourth quarter of 2016 than over the same period in 2015. Tehran said it aims to raise crude exports by 1 million bpd within six months of the sanctions being cancelled.
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