SINGAPORE: Oil traders are preparing for another downward turn in prices by March 2016, market data suggests, as what is expected to be an unusually warm winter dents demand just as Iran’s resurgent crude exports hit global markets after sanctions are ended.

Crude futures have already lost around 60 per cent of their value since mid-2014 as supply exceeds demand by roughly 0.7 million to 2.5m barrels per day to create a glut that analysts say will last well into 2016.

Goldman Sachs said on Thursday that there was a substantial risk of a “sharp leg lower” in oil prices.

“Mild winter weather over the coming months could see weak heating demand in the US and Europe,” it said. This “would likely be the trigger for adjustments through the physical market, pushing oil prices down to cash costs, which we estimate are likely around $20 per barrel,” the bank added.

A recent steep rise in March put option positions tied to a $35-per-barrel strike price in Brent and West Texas Intermediate (WTI) crude suggests traders agree with the bank and expect the major benchmarks to slump in coming months.

For WTI, put positions at the $30 strike price have more than doubled since Nov 10, but have stayed flat at a more modest level for Brent.

This is in accord with a broadly held view that while oil prices in general will remain under pressure over the medium term, WTI prices may fall faster and further than Brent.

Goldman and other analysts say persistently high US shale oil output that producers aren’t allowed to export could overwhelm the country’s storage tanks, which are already filled with near-record inventories.

Compounding the production glut is an expectation of a mild winter as a result of an El Nino weather pattern, which is expected to limit heating oil demand. The market may also have to accommodate a rapid rise in Iranian oil exports if sanctions are lifted, which many analysts say could happen in the first half of 2016.

Published in Dawn, November 20th, 2015