Oil prices slid more than 4 percent to new 11-year lows on Wednesday as the row between Saudi Arabia and Iran made any cooperation between major exporters to cut output even more unlikely.
The furor over Saudi Arabia’s execution of a Shi’ite cleric has stripped nearly 8 percent off the price of oil in the last three trading days, killing speculation that OPEC members might agree to production cuts to lift prices.
“There are rising stockpiles and the tension between Iran and Saudi Arabia make any deal on production unlikely,” said Michael Hewson, chief market analyst at CMC Markets.
Evidence of slowing economic growth in China and India has meanwhile fueled fears that even strong demand elsewhere may not be enough to mop up the excess crude that has resulted from near-record production over the last year.
Benchmark Brent crude futures were at $35.07 a barrel at 1318 GMT, down $1.58 on the day, and reached their lowest since early July 2004, having staged their largest one-day drop in percentage terms in nearly five weeks.
U.S. crude futures were down $1.25 cents at $34.72 a barrel after slipping 79 cents the previous day.
Oil has slumped from above $115 in June 2014 as shale oil from the United States has flooded the market, while falling prices have prompted some producers to pump even harder to compensate for lower revenues and to keep market share.
Adding to this oversupply, Iranian oil exports are widely expected to increase in 2016 as Western sanctions against Tehran over its nuclear program are lifted.
“Shale production and increasing capacity from countries like Russia who need to protect revenue combined with expectations of further Iranian supply mean actual production as well as expectations of future production are rising,” Hewson said.
Still, a senior Iranian oil official said the country could moderate oil export increases once sanctions are lifted to avoid putting prices under further pressure.