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Iran’s Crude Oil Production: Biggest Bearish Catalyst for Crude Oil

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Iran’s crude oil production 

ANZ Bank Group estimated that Iran’s oil production increased by 1 MMbpd (million barrels per day) since January 2016. Iran was able to scale up its crude oil production due to lifted sanctions. ANZ Bank Group expects that Iran could hit a crude oil production level of 4 MMbpd by 2017. Read the previous part of the series to learn about Saudi Arabia’s vital role in driving crude oil prices.

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Iran’s crude oil production in March 

Iran’s crude oil production increased by 100,000 bpd (barrels per day) to 3.2 MMbpd in March 2016—compared to the previous month. Read How Is OPEC Crude Production Trending ahead of Doha Meeting? for more on OPEC members’ crude oil production. Iran’s crude oil exports rose to 2 MMbpd in March 2016. March was Iran’s highest production level since July 2012.

Impact

Iran’s oil ministry reported that its crude oil production will rise until it hits pre-sanction crude oil production levels. The rise in crude oil production from Iran will have a negative impact on crude oil prices in the oversupplied market. Multiyear low crude oil prices are also motivating oil producers to produce more to offset lower oil prices. Read How Are Oil Prices Squeezing OPEC Members’ Budgets? to learn more.

Lower oil prices impact Middle East oil and gas producers like the National Iranian Oil Company and the Kuwait Petroleum Company. They also impact US upstream players like Oasis Petroleum (OAS), Energy XXI (EXXI), WPX Energy (WPX), Denbury Resources (DNR), and Range Resources (RRC).

ETFs like the ProShares Ultra Bloomberg Crude Oil ETF (UCO), the PowerShares DWA Energy Momentum (PXI), the United States Brent Oil (BNO), and the ProShares UltraShort Bloomberg Crude Oil ETF (SCO) are also influenced by volatile crude oil prices.

In the next part, we’ll discuss hedge fund futures and options positions in the crude oil markets.

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