“Iran is able to increase its oil production by 500,000 barrels a day after the lifting of sanctions, and the order to increase production was issued today”, Iran’s Deputy Oil Minister Rokneddin Javadi is quoted as saying by Iranian media.
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Oil sank to a 12-year low of less than $28 a barrel in London on Monday as the removal of worldwide sanctions over the weekend freed Iran to revive crude exports, threatening to swell a glut created by fellow OPEC members and U.S. shale drillers.
Warm winter weather around the world cut global oil demand growth to a one-year low of 1 million barrels per day in the fourth quarter of 2015, down from a near five-year high of 2.1 million bpd in the third quarter.
“Iran’s return to the oil market has been on the agenda for some time and therefore does not really come as any great surprise”, Commerzbank senior analyst Carsten Fritsch said in a note.
He said: “I don’t expect to see the price of oil falling to $20 dollars per barrel; I expect it to hover around $30 or thereabouts for about a month or two and then it should begin to climb”.
Worries about Iran’s return to an already oversupplied oil market drove down Brent crude LCOc1 to $27.67 a barrel early on Monday, its lowest since 2003.
“Saudi Arabia and others are going to ensure they don’t lose out”, said IEA oil mark division head Neil Atkinson. Opec’s forecast for global oil demand growth this year was tweaked slightly upwards to 1.26 million barrels per day to reach 94.17 mbpd.
The price of oil fell below $28 a barrel during early trading this Monday morning.
Goldman Sachs said that Iran’s production would rise by 285,000 barrels per day (bpd) year-on-year in 2016 while BMI Research said the rise would by 400,000 bpd.
Crude prices have been tanking for months, dropping to below $30 a barrel. “It’s just a wave of negativity coming through (with) the lifting of sanctions on Iran being the latest”, he added.
The monthly oil market report of the International Energy Agency raised a question, “Can it go any lower?” Iran’s regional rival Saudi Arabia is OPEC’s largest producer. “Bearish bets are at their highest level since 1983, indicating heightened concerns around Iran oil flooding the market”, ANZ bank said on Tuesday.
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Iranian President Hassan Rouhani plans to visit Italy and France next week on his first European trip since sanctions were lifted, a diplomatic source said yesterday.
