How Much Can Iran Scale up Production in Comparison to Its Peers?


Jan. 29 2016, Updated 2:05 a.m. ET

Iran’s massive oil in the sea

Iran has between 30 MMbbls (million barrels) and 50 MMbbls of crude oil and other liquids stored in supertankers ready to hit the markets. Iran has 13 VLCCs (very large crude carriers) loaded with oil ready for shipment to the Indian market, and India is interested in importing oil from Iran. Iran is scaling up its exports to the Indian market to 460,000 bpd (barrels per day) from the current level of 260,000 bpd. The Indian market will have demand for oil due to rising car sales of just over 10% annually. European markets are also interested in tapping into Iranian oil.

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Iran’s crude oil production in comparison with its peers’ production levels

We covered Iran’s crude oil production in the previous part of this series. Now let’s see how its peers have handled increasing production. OPEC (Organization of the Petroleum Exporting Countries) member nations Libya and Iraq took ten months and 11 months, respectively, to scale up production just over 1 MMbpd. This clearly implies Iran could easily scale up production due its lower total cost of producing crude oil, strategic location, and massive crude oil and natural gas reserves, despite the stressed oil market.

The catastrophic fall in oil prices affects national and international oil producers like PetroChina (PTR), Chevron (CVX), Occidental Petroleum (OXY), Roya Dutch Shell (RDS.A), Eni (ENI), ExxonMobil (XOM), and Petróleo Brasileiro SA Petrobras (PBR).

ETFs like the Vanguard Energy ETF (VDE) and the ProShares UltraShort Bloomberg Crude Oil ETF (SCO) are also influenced by the volatility in the oil and gas market. The collateral damage in the energy market continues to weigh on broader indexes like the S&P 500 Index (SPY).

Read the next part of this series to learn about crude oil price estimates.


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