Oil prices reversed course Monday afternoon, climbing above $35 after falling below that mark for the first time since the depths of the global recession on Monday.
North American crude prices rose more than 2 per cent, to $36.42 per barrel after slipping to $34.70 earlier in the day–a level not seen since February 2009.
Despite the modest rebound, some market watchers suggest there’s more pressure ahead.
A main cause for the drop was commentary from Iran reiterating the country’s intentions to ramp up output in the coming months, a move that will add to a global supply glut seemingly growing by the day.
‘The price can drop as low as possible as we are prepared for the worst scenario’
There is “absolutely no chance” the country won’t step up production, Iran’s deputy oil minister said overnight. “Our general assumption is on a market with low prices, so the price can drop as low as possible as we are prepared for the worst scenario,” the official said.
MORE: Latest coverage — plunging oil
“The real worst case scenario for Iran had been to be unable to ship any oil due to the embargo, so if you can ship some oil at depressed prices then it’s far better than the prior state of affairs,” economists at Scotiabank said.
Oil prices dropped more than 10 per cent last week after the Organization of Petroleum Exporting Countries (OPEC) similarly said it would not scale down production.
“This reinforces the market’s understanding that major producers are not taking steps to establish a price floor,” Scotiabank economists said.
Oil’s weakness also weighed on the loonie, which fell to 72.8 US cents — its weakest valuation since mid-2004. The slight rebound in oil helped stabilize the Canadian dollar in afternoon trading.
WATCH: Federal Finance Minister Bill Morneau says during a speech at the Toronto Board of Trade Monday the federal government’s projected budget deficit will be higher than previous forecasts due to further declines in oil prices.
— With a file from The Associated Press
Comments