Iran’s Crude Oil Production Could Help Crude Oil Bulls

Iran’s crude oil production 

The EIA (U.S. Energy Information Administration) estimates that Iran’s crude oil production was flat at 3.8 MMbpd (million barrels per day) in March 2017—compared to February 2017. Production rose 19% YoY (year-over-year). Iran’s crude oil production is at the highest level in seven years.

A Reuters survey estimates that Iran’s crude oil production rose by 10,000 bpd (barrels per day) to 3.77 MMbpd (million barrels per day) in March 2017—compared to the previous month.

Iran was able to increase its production after the US lifted sanctions on the country in January 2016. A rise in crude oil supplies from Iran would have a negative impact on crude oil (RYE) (ERY) (ERX) prices. For more on crude oil prices, read Part 1 of the series.

Lower crude oil prices have a negative impact on crude oil and gas producers’ earnings like National Iranian Oil Company, ConocoPhillips (COP), PDC Energy (PDCE), Cobalt International Energy (CIE), and Stone Energy (SGY).

Iran’s Crude Oil Production Could Help Crude Oil Bulls

Iran’s crude oil exports  

Iran’s Ministry of Petroleum reported that the country exported 3.05 MMbpd of crude oil and other liquids between February 20, 2017, and March 20, 2017. It’s the highest level since 1979, according to Bloomberg surveys. Iran targets to produce 5 MMbpd by 2021. The rise in foreign capital investment in oil and gas exploration and production activity will support oil production.

Iran’s crude oil production strategy 

Iran targets production of 4 MMbpd by April 2017, according to the National Iranian Oil Company. The company estimates that Iran targets to produce 4.7 MMbpd of crude oil by 2022. Iran plans to drill 500 new wells over the next five years. Iran’s crude oil production averaged 3.5 MMbpd and 2.8 MMbpd in 2016 and 2015, respectively.

Impact 

Iran is OPEC’s (Organization of the Petroleum Exporting Countries) third-largest crude oil producer after Saudi Arabia and Iraq. Iran was exempt from the production cut after major producers’ production cut deal in November 2016.

On April 16, 2017, Iran’s oil minister said that the country would be interested in joining major producers’ production cut deal if it’s extended in 2H17. Any cap on Iran’s crude oil production would support crude oil (FXN) (IXC) (XES) prices.

Read What Can Investors Expect in the Crude Oil Market in 2017 and EIA Downgraded Crude Oil Price Forecasts for 2017 and 2018 for more on crude oil prices.

Read Will Crude Oil Prices Test 3 Digits Again? for more on crude oil price forecasts.

For related analysis, visit Market Realist’s Energy and Power page.