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Could Iran Influence the Crude Oil Market?

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Updated

Crude oil prices  

October WTI (West Texas Intermediate) crude oil futures contracts rose by 1.5% and settled at $48.1 per barrel on August 23, 2016. Brent crude oil futures also rose by 1.6% and closed at $49.96 per barrel.

Crude oil prices rose ahead of the US crude oil inventory report. ETFs such as the United States Oil ETF (USO) and the ProShares Ultra Bloomberg Crude Oil (UCO) rose on August 23, 2016. They rose by 1.2% and 2.3%, respectively, on the same day.

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US crude oil inventory report  

The U.S. Energy Information Administration will release its weekly crude oil (UWTI) (SCO) (USL) inventory report for the week ending August 19, 2016, at 10:30 AM EST on August 24, 2016. The American Petroleum Institute released its weekly crude oil inventory report on August 23, 2016. For more on the inventory reports, read Part 2 and Part 3 of this series.

Iran and Oil producers’ meeting  

Iran is the third-largest crude oil producer among OPEC (Organization of Petroleum Exporting Counties) countries. On August 23, 2016, Reuters reported that Iran showed interest in joining the major oil producers meeting meant to freeze output and support crude oil prices. Read Crude Oil Producers’ Meeting: Is It Smoke without Fire? to learn more.

Venezuelan Oil Minister Eulogio said that Iran would scale up crude oil production to pre-sanctions levels of 4 MMbpd (million barrels per day). Then, it would participate in oil producers’ meeting to freeze output.

Iran produced 3.6 MMbpd of crude oil in July 2016. It exported more than 2 MMbpd of crude oil in June 2016, according to data from the Joint Organisations Data Initiative.

Iran, Saudi Arabia, and Russia’s comments suggest that major oil producers are trying to support oil prices. However, statistical data tell a different story. Read this series to learn more.

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Impact on stocks and ETFs 

Crude oil prices are trading close to two-month lows. Lower crude oil prices have a negative impact on oil producers’ earnings like PDC Energy (PDCE) and Bonanza Creek Energy (BCEI). They also impact ETFs and ETNs like the iShares Global Energy ETF (IXC), the iShares U.S. Energy ETF (IYE), the iShares U.S. Oil Equipment & Services ETF (IEZ), and the Direxion Daily Energy Bear 3x (ERY). 

What’s in this series?  

US crude oil prices are down 6.6% since their June 2016 highs. Read Part 4 through Part 6 in this series to learn about bearish crude oil drivers. In contrast, WTI crude oil prices have risen 83% since their lows in February 2016. Read Part 7 through Part 9 in this series for updates on bullish crude oil drivers. For more on US crude oil prices’ peaks and lows, read Chinese Fuel Exports Pressure Crude Oil Prices.

In the next part, we’ll discuss US crude oil prices in early morning trade on August 24 and US crude oil inventories.

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