Iran immediately announced a major boost in oil production, with the National Iranian Oil Company saying it had ordered output to increase by 500,000 barrels per day.
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Iran, a member of the Organization of the Petroleum Exporting Countries (OPEC), issued an order on Monday to increase production by 500,000 bpd, the country’s deputy oil minister said.
On Saturday, the USA and the European Union lifted economic sanctions that had shut Iran out of the global economic market for more than a decade.
The global oil demand growth will be at 1.2 million barrels per day in 2016, according to the forecasts of the International Energy Agency (IEA).
Most traders expect Iran’s full return to oil markets to be relatively slow due to the need to overhaul its infrastructure, which is creaking from years of under investment under the sanctions. “Non-OPEC marginal barrel production in the next six months will be sensitive to sustained low oil prices”.
Benchmark Brent crude has dropped 22 percent this year and lost as much as $1.27 on Monday to trade at $28.84 a barrel at 3:40 p.m.in London, amid oversupply and the looming surge in Iranian output. “They are not going to give up the fight and say “welcome back”. This will not change the picture dramatically”, the ministry said.
Saudi Arabia is anxious about a sanctionless Iran and a revival of the two country’s bitter rivalry over oil, according to a Monday Reuters’ report.
“Nevertheless their aggressiveness would continue to gear them up to return as one of the world’s largest oil producers”, PublicInvest Research opined. Data shows that short positions in United States crude markets, which would profit from further price falls, have hit a fresh record high.
The International Monetary Fund said the sharp collapse in the price of oil is proving more of a drag on the global economy than a stimulus. With supply outstripping demand already, this additional quantity would put further pressure on the price and it could slide further into the $20-30 per barrel range.
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U.S. Republicans, such as House Speaker Paul Ryan, and Israeli Prime Minister Benjamin Netanyahu criticized the development but Kerry said that Iran had “undertaken significant steps” to ensure that it met the worldwide community’s requirements and the EU’s foreign policy chief, Federica Mogherini said that “Iran has fulfilled its commitment”. Since January, the prospect of the lifting of sanctions on Iran accelerated the rout. “Bearish bets are at their highest level since 1983, indicating heightened concerns around Iran oil flooding the market”, ANZ bank said on Tuesday.
