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Iran: Boon or Bane for the Crude Oil Market in 2016?

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Iran and OPEC’s meeting 

Iran seems to be busy scaling up its production levels despite OPEC’s (Organization of the Petroleum Exporting Countries) meeting on June 2, 2016. For more on OPEC’s meeting, read the third part of the series. Saudi Arabia is also scaling up its crude oil production. Read the previous part of the series to learn about Saudi Arabia’s state of mind ahead of OPEC’s biannual meeting.

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Iran’s crude oil production and exports

Iran exported ~2 MMbpd (million barrels per day) of crude oil in April 2016. JBC Energy reported that Iran’s crude oil production rose to 3.38 MMbpd in May 2016—compared to 3.35 MMbpd in April 2016. OPEC’s monthly report showed that Iran’s crude oil production rose by 198,000 barrels per day to 3.5 MMbpd in April 2016—compared to March 2016. It almost doubled its exports since early 2016. Read What’s Next for the Crude Oil Mark in Iran? to learn more.

Iran’s oilfield tenders

Iran’s government official reported that Iran’s inviting international companies to bid for oilfield exploration and development rights in Iran in June 2016. Iran’s able to invite international companies due to sanctions being lifted by the US. The bids will start on June 21 and run for a month. Iran identified 70 oil and gas fields for exploration and development. Iran’s Oil Ministry reported that Iran needs $185 billion in investment to upgrade its oil, gas, and petrochemicals industries by 2020.

Impact on energy companies and ETFs

The rise in crude oil production from Iran will have a negative impact on crude oil prices. Low crude oil prices impact oil and gas producers like the National Iranian Oil Company, Energy XXI (EXXI), Triangle Petroleum (TPLM), and Denbury Resources (DNR).

ETFs and ETNs including 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 uncertainty in crude oil prices.

In the next part, we’ll discuss crude oil price forecasts.

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