Fears of a supply glut popped a rebound in the price of oil on Tuesday, with comments from Iran about higher production and a possible lifting of sanctions piling on further pressure.
West Texas Intermediate (WTI) futures fell as low as $42.63 a barrel—their weakest level since the March 2009 nadir of $42.51—before paring some losses.
Brent crude futures hovered near six-year lows below $53 a barrel, before also paring some losses.
Amrita Sen, chief oil analyst at energy research consultancy Energy Aspects, told CNBC that she expected prices to go lower in the short-term, with Brent dropping to the high $40 level and WTI breaking below the $40 mark.
“It’s (trading) positioning and the U.S. dollar that is accentuating the downtrend, for sure,” the London-based analyst told CNBC Tuesday.
“This is seasonality as well, we forget, its March, April. This is exactly when oil falls every single year. Sure, we usually come off from $110 down to $90, but this is the time when refineries go into maintenance.”
WTI prices have dropped around 60 percent since mid-June last year, and are around 18 percent below the rebound seen in the middle of February, when futures pushed back up to around $53 a barrel.
U.S. Secretary of State John Kerry was locked in talks on Tuesday with his Iranian counterpart in the Swiss city of Lausanne. Also on Tuesday, Iranian President Hassan Rouhani said that the country was already producing more oil, despite the sanctions, according to Reuters.
Kevin Book, research team head at ClearView Energy Partners, told CNBC on Tuesday that a deal with Iran was “more likely than not” and that Tuesday’s oil price move “might be actually unduly bearish.”
Washington D.C.-based Book said there was a more than a 50 percent chance of Iran being welcomed back into the international community, but that it would be through a series of “gates and steps” that could take time.
In a note on Tuesday morning, Barclays analysts Rahul Bajoria and Fabrice Montagne concurred that sanctions would not be removed in “one fell swoop.”
Sen said oil markets were heading into a period of “significant oversupply,” and with the dollar rising, she expected all commodities, including oil, to come under more pressure.
However, she added that it was market speculation and large exchange-traded funds that could have a bigger effect on the price. $92 million barrels of oil are consumed daily, but trillions of dollars of oil is traded every day, according to Sen.
“In the grand scheme of things we are oversupplied by 1 percent, if that. There has been an overreaction as well,” she said.
More optimistic voices in the oil industry suggest that prices could regain some strength later in the year.
At an oil conference in Cape Town, Ian Taylor, the CEO of oil trader Vitol, said that markets would “come into balance” by the second half of the year, according to Reuters.
“We should be able to see prices steady up, maybe go up a bit from there,” he said on Tuesday, according to the news agency.