Iran Orders 500000 bpd Oil Production Increase

Oil is down about 21 per cent this year amid volatility in Chinese markets and speculation a surge in exports by Iran after the removal of restrictions capping its crude sales will prolong a global glut.

WTI for February delivery fell as much as $1.06, or 3.6 percent, to $28.36 a barrel on the New York Mercantile Exchange.

According to industry analysts, the price of crude oil has reached this reduced value because of oversupply caused by concerns regarding Iran.

The IEA, which issues regular reviews of the health of the energy market, said more price weakness could lie ahead as a result.

Wall Street bled on Friday, with the S&P 500 sinking to its lowest since October 2014 as oil prices sank below $30 per barrel and fears grew about economic trouble in China.

The IEA cut its forecast for 2016 OPEC crude oil demand by 300,000 barrels a day to 31.7 million barrels per day due to slightly weaker demand growth.

The end of Western sanctions against Iran loomed Saturday as Iran’s foreign minister suggested the United Nations atomic agency is close to certifying that his country has met all commitments under its landmark nuclear deal with six world powers.

The sanctions are lifted, and it’s off to the races for Iran, which Monday ordered an increase in its oil production of 500,000 barrels per day.

Most analysts expect Iran’s full return to oil markets to be relatively slow due to the need to overhaul its infrastructure following years of under-investment.

They estimate that Iran already has some 46 million barrels of petroleum pumped and stored offshore and another 30-40 million barrels reportedly in storage on land.

Global economic growth was downgraded by the International Monetary Fund, as were the economies of major oil exporters Brazil and Saudi Arabia.

The year 2016 is expected to see a fall in oil price to below $25, according Ladbrokes.

“We think that it is a structural fall in the oil price”.

It said that factors behind that included, possibly, that cheaper crude prices were not being fully passed on to consumers, and, secondly, that businesses and consumers in some areas might still be reducing spending and debts.

On Monday, oil prices hovered around the $28 a barrel mark on news sanctions on Iran were being lifted. While that’s below official ministry plans to add 1 million a day by mid-year, it could still be enough to pressure prices further, the agency predicted.