Iran’s Crude Oil Production: Effect on the Global Oil Market

Iran’s crude oil production  

The UN (United Nations) lifted the oil sanction on Iran on January 15, 2016. The lifting of the sanction means Iran gets access to frozen assets and can immediately sell 40 MMbbls of crude oil at sea. Preliminary estimates suggest that Iran might have produced more than 3 MMbpd of crude oil in January 2016. The lifting of the oil sanction and estimates of a better Iranian growth rate suggest that Iran will continue to produce more oil in 2016, putting pressure on the global oil market.

Iran’s Crude Oil Production: Effect on the Global Oil Market

Iran’s crude oil exports hit new highs 

Iran’s crude oil exports are expected to rise by 20% in January and February 2016 compared to last year during the same period. This is according to data from the loading schedules. The data suggest that Iranian exports could average around 1.4 MMbpd in February 2016 and 1.6 MMbpd in 2016.

The 40 MMbbls of oil in the oil tankers have also shipped, according to shipping sources from the data compiled by Reuters. Iranian crude oil exports to India are expected to increase to 300,000 bpd in February 2016 compared to 183,000 bpd in January 2016. Iran’s oil exports will increase by 200,000 bpd to Europe in the near term. OPEC member Iran estimates it will ramp up exports to China by 504,000 bpd.

The record global crude oil inventory and the contango market benefit oil tankers such as Nordic American Tankers (NAT), Frontline (FRO), and DHT Holdings (DHT). You can read more about the US inventory in the third part of the series. Record oil inventory will continue to put pressure on oil prices and the margins of oil producers such as ConocoPhillips (COP), Pioneer Natural Resources (PXD), and Noble Energy (NBL).

The roller coaster ride in the oil market also affects ETFs and ETNs such as the United States Oil Fund (USO), the VelocityShares 3X Long Crude Oil ETN (UWTI), and the ProShares UltraShort Bloomberg Crude Oil ETF (SCO). In the next part of this series, we’ll find out more about US crude oil production.