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Iran’s New Diplomatic Ties with the US, Oil Inching to New Lows

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Jan. 15 2016, Updated 9:58 a.m. ET

Why did Iran release the US sailors quickly?

In the past few days, Iranian Revolutionary Guards captured ten American sailors who had entered Iranian water boundaries. Soon after the capture, they were set free by Iranian authorities. Although the entire incident might seem confined to political grounds, it did have an effect on energy investors. Iran is a passive player in the crude oil market because of the sanctions imposed on it by several countries, led by the United States (SPY).

[marketrealist-chart id=969877]

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Iran’s controversial nuclear project has resulted into political and economic headwinds for the country. It was neither able to make revenue when crude oil was at historical highs, nor was it able to grab market share when crude fell near to 12-year historical lows. Iran is also sitting on large natural gas reserves that it’s not able to extract because of sanctions. Energy investors should note that Iran is setting a platform to grab market share both in crude oil as well in natural gas.

The series will analyze the following points:

  • why Iran is interested in starting a new diplomatic regime with the United States
  • Iran’s strategic plan to regain regional leadership
  • Iran’s plan to become the largest gas supplier to Europe and Asia
  • how long Iran and Russia’s growing ties can sustain
  • moving average analysis of different energy streams along with a look at renewables

Oil and gas industry inching to new lows

The United States Oil Fund (USO) fell 17.4% on a month-to-date basis, and the upstream operators ConocoPhillips (COP), Anadarko Petroleum (APC), and Pioneer Natural Resources (PXD) fell 16%, 9.3%, and 9%, respectively, on a month-to-date basis as of January 13, 2016.

The graph above shows the performance of USO for the last six months. In the next part, we’ll discuss why Iran is curious to enter the crude market.

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