Hellenic Petroleum to meet Iran oil officials on Friday

Iran has issued an order to increase crude oil production by 500,000 barrels a day, the deputy oil minister was quoted as saying on Monday, implementing its policy to boost production as soon as sanctions were lifted.

The Persian Gulf nation will only be able to increase oil production by 100,000 barrels a day, or 3.7 percent, a month after sanctions are lifted and by 400,000 in six months, according to the median estimate of 12 analysts and economists surveyed by Bloomberg.

“The oil market faces the third successive year when supply will exceed demand by 1 million barrels per day and there will be enormous strain on the ability of the oil system to absorb it efficiently”, IEA says.

Oil futures remained under pressure in early trading on Tuesday, following a slide that has seen prices fall by more than a quarter since the beginning of the year, as the full return of Iran to oil markets adds to an already huge supply overhang.

With OPEC deciding last December against cutting output, traders are betting the cartel is less likely to cut output now to prevent easy passage of Iranian crude into the market, particularly at a time of tensions between Iran and Saudi Arabia. Brent plumbed below $28 for the first time since November 2003 on Monday.

West Texas Intermediate crude, the main North American contract, fell 38 cents to $29.06 a barrel on Monday morning.

Data shows that short positions in USA crude markets 1067651MSHT, which would profit from further price falls, have hit a record high. Just few years ago, OPEC countries would adjust their production to keep prices in check, but it’s unlikely the group will do something like that now.

The US government has also revoked a 40 year old ban on its crude reserves, resulting in oil flows out of the US crude price zone and into Brent.

China’s CNOOC said it aimed to cut oil and gas production this year and expected output to rebound in 2018.

“We do not believe that Iran would want to depress prices much further by rushing to dump its inventories”, Jessop said.

Oil markets could “drown in oversupply, ” sending prices even lower as demand growth slows and Iran boosts exports, according to the International Energy Agency.

It said Europe is expected to be the initial target for Iranian oil exports but noted that Iran “will have to offer incentives and ensure sufficient transparency in its domestic banking sector to lure back European buyers”.