Iran’s Oil Production and Exports Could Help Crude Oil Bulls

Gordon Kristopher - Author

Aug. 18 2020, Updated 5:17 a.m. ET

Iran’s crude oil production 

Iran is OPEC’s third-largest oil producer. Reuters surveys estimate that Iran’s crude oil production decreased by 20,000 bpd (barrels per day) to 3.80 MMbpd (million barrels per day) in May—compared to the previous month. However, Iran’s oil production is near a nine-year high.

Iran’s crude oil output increased after the US lifted sanctions on the country in January 2016. Brent and WTI oil prices have risen ~102.3% and ~76% since January 1, 2016.

The SPDR S&P Oil & Gas Exploration & Production ETF (XOP) has increased ~39%, since January 1, 2016. XOP seeks to follow the performance of the S&P Oil & Gas Exploration & Production Select Industry Index.

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Tellurian (TELL), Resolute Energy (REN), WPX Energy (WPX), and Continental Resources (CLR) account for ~5.5% of XOP’s holdings. These stocks have risen ~1,883%, 564%, 202%, and ~182%, respectively, since January 1, 2016. These stocks have been the top percentage gainers in XOP’s holdings since January 1, 2016.

Iran’s crude oil exports

Iran’s crude oil exports reached 2.7 MMbpd in May—the highest level since the sanctions were lifted in January 2016. The exports increased ahead of possible new sanctions from the US. On May 8, President Trump said that the US is exiting the Iran nuclear deal. President Trump plans to impose new sanctions on Iran.

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Iran and OPEC’s output cut deal  

Iran supported extending the supply cuts until December. OPEC allowed Iran to increase its crude oil production slightly to help it recover market share lost while the country was under US sanctions. Iran is allowed to cap its crude oil production at ~3,800,000 bpd. 

Iran’s crude oil production plans

Iran’s crude oil production averaged 3.8 MMbpd in 2017. The country aims to increase its oil production to 4.7 MMbpd by 2021. Iran is looking for options of euro-denominated and renminbi-denominated crude oil sales, which could limit the impact of US sanctions.

However, US sanctions on Iran could curb the country’s crude oil production and exports. According to Reuters, Iran’s crude oil supplies could drop by 300,000 bpd–1,000,000 bpd depending on how many countries support the sanctions on Iran. Lower oil supply from Iran could support crude oil prices and push them higher.

Next, we’ll discuss US crude oil production.


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