“Lower oil prices normally lead to lower product margins, especially for non-integrated producers”.
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On the New York Stock Exchange NYMEX (New York Mercantile Exchange) cost of the US Light crude oil decreased $0.86 to stand at $28.82.
The price of USA crude oil has been decreasing for more than a year now and it has fallen nearly 40 percent in the past three months and was valued around $29.04 a barrel.
Because of the availablility of Iranian oil, Kloza thinks oil prices could dive to $25 a barrel for at least some time.
Brent crude, the global oil benchmark, fell 0.8% to $28.72 a barrel on London’s ICE Futures exchange.
On Monday, Iranian officials said they meant to increase oil production by 500,000 barrels per day.
“With the removal of sanctions, Iran is ready to increase production by 500,000 bpd and today this order was issued”, Rokneddin Javadi, the head of the National Iranian Oil Company and the deputy oil minister, said in a statement.
But OPEC also said that its combined output-at 32.2 million barrels a day in December-remains above the demand for the group’s oil, which OPEC pegs at 31.6 million barrels a day this year.
Still, the lifting of the global sanctions against Tehran is expected to add to the bearish sentiment engulfing the market.
Shanghai stocks again swung in and out of positive territory, having plunged nearly nine percent last week and nearly about a fifth this year already. As of end-November, Iran has an estimated 36m barrels of oil held at sea in tankers, according to the International Energy Agency (IEA).
In the first comment by a Gulf OPEC member about Iran since sanctions were lifted, UAE Suhail bin Mohammed al-Mazroui said that any new production coming into the market would delay the rebalancing of the market and “that’s the bad news”.
“We are watching the developments closely”.
Nevertheless, analysts say Iran may struggle to rapidly boost its production because its infrastructure, harmed by years of inactivity, needs foreign investment that will take time to arrive.
The announcement to lift sanctions on Saturday, seen as unexpected by some given its speed of implementation, came just a month before Iranians vote in a crucial parliamentary election.
China absorbed about half of the Middle Eastern country’s PE production in 2015, industry sources said. This remote chance is now gone as the lifting of the sanctions is now definite.
“There are a lot of people who thought oil can’t go down much further and tried to call a bottom,”said Michael Corcelli, chief investment officer of hedge fund Alexander Alternative Capital LLC in Miami”.
Talk about a rude welcome back for Iran.
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“Iranian companies had been waiting for this [lifting of sanctions] and they are intending to ramp up productions of petrochemical products, including PE, and sell to the rest of the world where there is demand now”, said a PE producer in southeast Asia.
