Oil remains below $40, little optimism to see big rebound due to supply glut

Oil traders have found few reasons for optimism in the closing months of 2015 as supplies continued to swell and OPEC kept to its policy of not cutting production.

Opec took no action to cut output and support prices at the most recent meeting of ministers and removed its 30m barrels a day official ceiling. This took away any pretence of production constraint.

How Iraq and Saudi Arabia, which reached record production levels in 2015, perform next year will be watched closely, particularly as additional Iranian barrels make their way to market after the expected lifting of international sanctions.

With the Kingdom not willing to capitulate to calls for unilateral cuts and Iran refusing to limit its production, the scene has been set for an intensifying rivalry within Opec that could put more pressure on prices in the coming year.

Oil prices have reached financial crisis-era lows recently and both of the leading benchmarks — WTI and Brent crude — are now trading below $40 a barrel.

As 2016 approaches, market participants are asking how low prices can go or if the market is finally ready to rebound after one of the worst years on record.

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