Oil price likely to sink even lower

Oil prices, which have already hit the lowest mark in a decade, could fall further in the first half of next year, partly due to the resumption of Iranian supply, officials and experts here said Wednesday.

At a forum hosted by the Trade Ministry, experts forecast that the benchmark oil price could hover around $40-$50 a barrel next year. However, it could fall rapidly when Iran increases its oil exports in the wake of the lifting of international sanctions, they said.

It may take some time for Iran to fully recover its oil supply volume to the pre-sanction levels. But, the country will be able to boost its output by up to 1 million barrels a day starting next year. It holds at least 30 million barrels in floating storage, they said, quoting reports.

The Islamic republic’s full return to the oil market could aggravate downside risks for oil products, prices of which have plunged almost 50 percent since last year amid a supply glut. On Monday, the benchmark Dubai crude price dropped to $31.98 a barrel, the lowest level in 10 years.

The disagreement among oil-producing countries also adds weight to the forecast of cheaper oil next year.

Earlier this month, members of the Organization of the Petroleum Exporting Countries failed to set an oil production ceiling, after Iran said it would not curb its oil output until it reaches the pre-sanction level. Venezuela, meanwhile, said it wants to decrease production, citing growing financial pressure imposed by falling oil prices.

In addition, China’s slowing oil consumption and lower global independence on oil as well as a gain in the strength of the U.S. dollar after the Fed’s rate hike is also expected to delay a recovery in oil prices, experts added.

The falling oil prices, meanwhile, have had an impact on the domestic market, with consumers spending money more easily on oil related products than before. The benchmark gasoline price for consumers posted 1,420 won per liter as of Wednesday.

With gasoline prices dropping, the sales of large sedans ― 2000 cc and above ― surged to a record high in 13 years, according to the Korea Automobile Manufacturers Association. Although large vehicles are less energy efficient, as their fuel consumption is higher, about 400,000 sedans are expected to be sold, accounting for more than 20 percent of the 1.8 million new cars estimated this year, it said.

The number of Koreans traveling overseas surged 30 percent as of November, too, with air carriers offering cheaper tickets by passing on the benefits of lower fuel surcharges.

Rental car reservations jumped near 20-fold from last year, according to online shopping portal Auction. While highway traffic volume in the third quarter of this year was also 8 percent higher than the same period last year, Korea Expressway Corporation said.

By Cho Chung-un (christory@heraldcorp.com)