Brent crude oil fell below $58 a barrel on Tuesday on signs of growing oversupply as Iranian officials visited Beijing to seek more oil sales following the framework nuclear deal that could lead to the lifting of sanctions.
China is Iran’s largest trade partner and has bought roughly half of its crude exports since 2012, when sanctions against the Islamic Republic were tightened.
Oil markets were also pressured by a Goldman Sachs report saying prices needed to remain low for months to slow U.S. oil output growth.
Brent LCOc1 was down 70 cents at $57.42 a barrel by 1335 GMT. U.S. crude CLc1 was down 75 cents at $51.39 a barrel.
Representatives of state-run National Iranian Oil Company will meet China’s biggest crude buyers including Unipec, the trading arm of top Asian refiner Sinopec Corp (0386.HK), and state trader Zhuhai Zhenrong Corp, officials told Reuters.
Global oil markets already face a supply glut with producers pumping over 1.5 million barrels per day (bpd) more than demand in the first half of this year, analysts say.
“There is a massive oversupply. Stocks are rising and now we have the prospect of more Iranian oil coming onto the market,” said Carsten Fritsch, analyst at Commerzbank in Frankfurt.
Goldman said in a research note it expected U.S. crude inventories to top out in April and subsequently be drawn down at 350,000 bpd during the May-September period, when demand for fuel to power cars and air-conditioners is at its greatest.
Still, the bank said it saw little upside for its $40-a-barrel forecast over the next three months, anticipating inventories would rise again by October, pressuring prices into 2016.
“Prices need to remain low in coming months to achieve a sufficient and sustainable slowdown in U.S. production growth,” the bank said, adding that the U.S. outlook for 2016 made its forecast for $65-a-barrel oil next year look too high.