A strong U.S. dollar and Iran's plans to pour oil on an already glutted market sent U.S. crude below $50 per barrel on Tuesday.
Cooling economies in oil-hungry Asia and Europe also have weakened demand, sending the price below $50 for the first time since April.
With the U.S. Federal Reserve expected to raise interest rates later in the year “a firmer U.S. dollar makes crude more expensive for buyers using other currencies since crude is priced in the U.S. dollar,” explained Victor Shum, vice president of IHS Energy in Singapore.
During most of the Asian trading day, Tuesday, West Texas Intermediate (WTI) crude priced on the New York Mercantile Exchange was below $50 per barrel.
Iran, anticipating the lifting of embargoes on its supply within months after the recent nuclear deal with Western powers, is said to have loaded super tankers in the Persian Gulf with tens of millions of barrels of oil awaiting purchase orders.
“It has been reported that one of these ships has already set sail for Asia. The destination is unknown. But I guess the Iranians are moving crude closer to markets to get ready to supply customers,” Shum told VOA.
Six world powers concluded a deal last week with Iran to curb the Islamic Republic's nuclear program and prevent it from building an atomic bomb.
Iran has the fourth largest oil reserves in the world but sanctions by the U.S., and countries in Europe and elsewhere have stymied its ability to obtain U.S. dollars for international transactions.
The slump in oil prices most hurts Middle East producers and nations such as Venezuela, already beset with protracted economic problems.
Economists say Russia and Nigeria also need crude prices to be at or above double their current levels to avoid their government budgets sinking into deficits.
But a sustained low oil price is welcome news for most of Asia.
“Some of the largest importers of crude are located in Asia, China, India, [South] Korea, Japan, these are big importers,” said Shum. “And so these large Asian economies will benefit from low oil pricing. This will help the economies in the Asian region.”
Analysts at several major banks, such as JP Morgan and Barclays, do not see prices staying this low later in the year. They predict Brent, the benchmark for traded sweet light crude, to rise above $60 per barrel in the third quarter of this year. Brent was trading in the $56 range on Tuesday.