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Will the US and Iran Pressure the Crude Oil Market?

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US production

The EIA (U.S. Energy Information Administration) published that US crude oil production rose by 9,000 bpd (barrels per day) to 9.604 MMbpd (million barrels per day) for the week ending July 3, 2015. Last week, US production fell by 9,000 bpd to 9.595 MMbpd for the week ending June 26, 2015. US output rose for the sixth time in the last ten weeks. Likewise, US output is 12.82% more than last year’s production of 8.514 MMbpd. This is the highest production since the 1970s.

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In contrast, monthly US crude oil figures fell by 50,000 bpd in May 2015—compared to April 2015, according to the EIA’s monthly STEO (Short-Term Energy Outlook) report in July. US output was at 9.7 MMbpd in April 2015. The EIA added that US production is expected to rise to 9.47 MMbpd in 2015 and slow down to 9.32 MMbpd in 2016.

The previous report estimated US output at 9.43 MMbpd in 2015 and 9.27 MMbpd in 2016. The consensus of rising crude oil production will continue to put pressure on the crude oil market. This will impact some of the shale oil producers like Laredo Petroleum (LPI), Whiting Petroleum (WLL), and Marathon Oil (MRO). Lower oil prices will also impact ETFs like the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and the Select Sector SPDR Fund ETF (XLE).

Iran’s nuclear deal

In the latest developments of Iran’s nuclear talks, a possible delay might send negative cues to the crude oil market. This could support oil prices. In contrast, successful nuclear accord between Iran and the global heavyweights could mean that the crude oil market gets flooded with more than 700,000 barrels of crude within six months of lifting the sanctions. This would put more downward pressure on crude oil prices.

US production and the Iran deal could expand the oil supply in the oversupplied market. This could cause collateral damage to oil prices. The EIA expects that Iran’s oil sanctions could drag crude oil prices lower by $5–$15 per barrel.

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