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Will OPEC Stabilize the Crude Oil Market despite Trump's Victory?

PART:
1 2 3 4 5 6 7 8
Part 6
Will OPEC Stabilize the Crude Oil Market despite Trump's Victory? PART 6 OF 8

Will Trump Impact Iran’s Crude Oil Production?

Iran’s crude oil production

The EIA (U.S. Energy Information Administration) estimates that Iran’s crude oil production rose by 20,000 bpd (barrels per day) to 3,680,000 bpd in October 2016—compared to September 2016. 

Iran’s crude oil production averaged 2.84 MMbpd (million barrels per day) in 2015. It averaged 3.5 MMbpd in 2Q16. Iran was able to increase its production after the US lifted the sanctions on the country.

However, Donald Trump’s surprise victory could impact Iran’s crude oil production. In his election campaign, Trump highlighted that lifting the sanctions on Iran was one of the “worst deals ever negotiated” by the US. Trump might keep everyone guessing about whether he will pull out of the deal after he becomes the president in January 2017.

Will Trump Impact Iran’s Crude Oil Production?

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Iran’s crude oil exports

A Bloomberg survey estimated that Iran exported 2.4 MMbpd of crude oil in October 2016—the highest since 2011. Iran’s crude oil exports rose due to a rise in imports from India, South Korea, Japan, and Europe. Iran exported 2.2 MMbpd of crude oil in September 2016.

Iran’s crude oil production strategy

National Iranian Oil Company reported that Iran targets production of 4 MMbpd by the end of 2016 or early 2017. However, many analysts think that Iran isn’t investing heavily enough to increase its crude oil production.

Impact

Iran is willing to support any plan to cap OPEC’s production if it’s allowed to pump 4 MMbpd of crude oil. Any rise in crude oil production from Iran will delay rebalancing the crude oil market. Read Stumbling Blocks for Crude Oil: Is a Market Rebalance Delayed? to learn more.

Lower crude oil prices will have a negative impact on oil producers such as Matador Resources (MTDR), Chevron (CVX), SM Energy (SM), and Bonanza Creek Energy (BCEI).

The rollercoaster ride in crude oil prices also impacts ETFs and ETNs such as the ProShares UltraShort Bloomberg Crude Oil (SCO), the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), the Fidelity MSCI Energy (FENY), the PowerShares DWA Energy Momentum ETF (PXI), the Direxion Daily Energy Bear 3x (ERY), the VelocityShares 3x Long Crude Oil ETN (UWTI), and the United States Brent Oil ETF (BNO).

In the next part of this series, we’ll take a look at the Commodity Futures Trading Commission’s “Commitments of Traders” report.

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