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Key Estimates for Iran’s Oil Production in 2016

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Iran’s oil sanctions are lifted

On January 16, 2016, Iran’s oil sanctions were lifted, as Iran abided by the International Atomic Energy Agency’s regulations. This means Iran has no restrictions on selling its crude oil and other products anywhere in the world. However, under the depressed energy market conditions, will Iran be able to scale up production? Iran’s crude oil production averaged 2.8 MMbpd (million barrels per day) in the last three years. Its crude oil production peaked at 5.5 MMbpd during the late 1970s. However, production fell due to civil war in the 1970s and Western oil sanctions in 2011.

Projections for Iran’s crude oil production

Bloomberg surveys suggest Iran could scale up production to 400,000 bpd (barrels per day) by the end of 2016. The International Energy Agency estimates Iran could add 300,000 bpd in 1Q16. However, the Energy Information Administration estimates that Iran’s crude oil production could average 3.1 MMbpd in 2016. This means an increase of 300,000 bpd for the whole year compared with 2.8 MMbpd in 2015. Production would then rise to 3.6 MMbpd in 2017. In sum, oil production would rise by 0.8 MMbpd in 2017 as compared to 2015. This would balance the slowing non-OPEC production and put pressure on crude oil prices, thus extending the bear market.

The long-term lower crude oil prices negatively affect the margins of oil and gas producers like Total (TOT), Eni (ENI), China Petroleum & Chemical Corporation (SNP), Chevron (CVX), Occidental Petroleum (OXY), ExxonMobil (XOM), and Petróleo Brasileiro SA Petrobras (PBR). ETFs and ETNs like the iShares U.S. Oil & Gas Exploration & Production ETF (IEO), the VelocityShares 3X Long Crude Oil ETN (UWTI), and the ProShares UltraShort Bloomberg Crude Oil ETF (SCO) are also influenced by the ups and downs in the oil market.

Read the next part of this series to explore how much Iran can actually ramp up production in comparison to its peers.

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