Oil prices declined on Thursday on worries Iranian oil will add to existing supply glut.
The International Energy Agency estimates that within six months of sanctions ending, Tehran could bring daily production to 3.6 million barrels—or about 800,000 barrels a day above current production. That would mark Iran’s highest level of crude output since 2011.
Nymex crude oil futures for December delivery lost 0.95% to trade at $45.88, while December Brent lost 0,5% to trade at $48.33 a barrel.
On Wednesday, oil fell nearly 4% after the Energy Information Administration said U.S. crude inventories added 2.85 million barrels last week, despite a drop in imports to their lowest level since 1991.
OPEC oil ministers are expected to meet on December 4 to judge whether to extend their year-old strategy of allowing prices to fall to slow higher-cost rival supply.
Iran
The future of the oil market in 2016 will mostly depend on several
oil fields with names such as Ahwaz, Gachsaran, Bibi Hakimeh, and
Darkhovin. All of them are pumping crude which lies under
the hills of the Zagros mountain range in western Iran.
Since mid-2012 the fields have been producing far below their capacity because of U.S. and European sanctions limiting Iranian oil exports. Now that Tehran has reached a deal with the Western powers to resolve the dispute over the country’s nuclear program, Iranian engineers are working to bring the fields back to full production.
The return comes as the global supply eclipses the demand.
According to the IEA, global oil production in the first
half of 2015 averaged 95.7 million barrels a day, while average daily
consumption came in at only 93.8 million barrels.
The difference of almost 2 million barrels a day - equal to the daily consumption of France - has made traders turn supertankers into floating storage facilities. Iran made a similar move when sanctions were imposed in 2012, converting their extensive fleet of crude tankers into giant storage bins that have spent much of the past three years anchored in the Persian Gulf.
Much of Iranian crude could be realized in Southern Europe, as Iran aims to regain customers it lost in France, Italy, and Greece. After sanctions made European countries stop purchases from Iran, Southern Europe turned to Saudi Arabia, Russia, and Iraq as its main suppliers. Analysts say that to take back market share, Iran will have to offer customers cheaper crude than the Saudis and Russians.
