SINGAPORE, July 13 (Reuters) – Oil prices opened up lower on Monday as Iran and six world powers were close to nailing down a nuclear deal, while Greece and its creditors failed to find a bailout agreement over the weekend.
The potential of Iran soon adding to global oil oversupply and the demand side weakening over China and Europe led several analysts to say that crude would fall further.
Iran and six world powers were on the brink of finding a nuclear deal that would bring sanctions relief in exchange for curbs on Tehran’s nuclear programme.
In Europe, the Greek debt crisis continued as political leaders argued late into the night at an emergency summit, so far without result.
And in Asia, investors will watch whether China’s stock markets can stabilise after a barrage of government support sparked a bounce in its key CSI300 stock index.
Front-month U.S. crude futures were trading at $52.13 per barrel at 0025 GMT, down 61 cents from their last settlement. Front-month Brent crude was down 69 cents at $58.04 a barrel.
With oversupply ongoing and abundant economic risk, several banks said they had lowered their oil price forecasts.
“The oil market has faced persistently weak supply/demand balances for months. Now macro risks from Greece, Iran, and China are adding to the poor micro,” Bank of America Merrill Lynch said, adding that U.S. crude prices “could soon drop well below our $50 per barrel target in 3Q15”.
Deutsche Bank said “oil market fundamentals remain weak and, in the absence of OPEC production cuts or material supply disruption, this is unlikely to change.”
Commerzbank said that a potential return of Iranian supplies could add to current oversupply of 1.5 to 2 million barrels per day put additional pressure on prices from the supply side while there were also downside risks on the demand side.
“The China Association of Automobile Manufacturers has just lowered its growth forecast for vehicle sales this year sharply from 7 percent to 3 percent, which will no doubt have a dampening effect on gasoline demand,” the bank said and added that “a fall below $55 per barrel in Brent and below $50 per barrel in WTI (U.S. crude) is therefore conceivable”.
China’s sentiment this week will be tested by trade flows data to be published later on Monday, as well as its gross domestic product report on Wednesday.