Iran says boosting oil exports depends on future demand

Brent crude LCOc1 settled at $37.28 a barrel on Thursday. US prices posted a second straight annual loss for the first time since 1998.

Although prices are expected to recover, their upside will likely be capped this year at around US$60 a barrel, at which onshore supply led mainly by shale oil in the United States will rise sharply, as it is lucrative enough for producers to bring partially-developed wells into production, Hallead said. Cushing inventories stood at a record high as of December 25, EIA data show, sparking some concerns that Cushing, which is the delivery point for Nymex futures, could run out of storage space for oil. As it turned out the traders were correct and oil prices fell by another third this year. This is despite the fact that many OPEC members, including the Saudis, are feeling the pain of markedly soft crude prices; many are now grappling with large funding gaps in their budgets. The country imported 10 percent of its oil from Iran in 2000, but sanctions have cut that figure to roughly 5 percent in fiscal 2014.

Iran’s oil exports have fallen to around 1 million bpd, down from a peak pre-sanctions peak of nearly 3 million bpd in 2011. The group, however, has been producing almost a million more barrels than its ceiling for the past 16 months. The crude oil supply-and-demand dynamics drive crude oil prices.

Money managers including hedge funds added to their bets that oil prices would fall in the week ended December 22, according to the most recent data from the Commodity Futures Trading Commission.

“We see a potential for a temporary undershoot of US$36 a barrel”, BMI analysts said.

In October, Mohsen Qamsari, the director for worldwide affairs at the National Iranian Oil Company (NIOC) said Iran plans to export 350,000 bpd of oil to Japan when the West-engineered sanctions are lifted against the Islamic Republic.

The clash between the two Middle Eastern countries comes as Iran, which holds some of the largest proven reserves, hopes to ramp up oil exports following the expected removal of sanctions against it after reaching a deal on its alleged nuclear weapons development program.

“The statements at the weekend by (Iranian oil officials) that Iran would only increase production at the level of the market can absorb seems to be a shift in rhetoric”.

“For the smaller and more cash-strapped countries, such as Iran, every barrel they place in the market counts because that’s how they can get hard currency”, said Virendra Chauhan, an analyst at consulting firm Energy Aspects. Diesel futures rose 0.2% to $1.1264 a gallon.