Iran to up oil output by 500000 barrels

Iran said on Sunday that it is ready to increase exports by 500,000 bpd. Last month, OPEC predicted a drop of 380,000 bpd. “There is a real oversupply in the market, but I think that’s already reflected correctly in the price”.

Many forecasting organizations agree with OPEC that production growth outside the organization will fall as companies defer or cancel projects.

As it attempts to claim market share in the Mediterranean, the National Iranian Oil Co. will seek to reactivate its contract with the SUMED pipeline that carries oil from the Red Sea into the region, the IEA said.

The result could lead to oil prices in the mid-$20s a barrel, and with occasional bouts of panic selling, briefly dip into the teens, said Tom Kloza, chief global analyst for the Oil Price Information Service.

The price of oil fell below $28 a barrel during early trading this Monday morning. This has lifted the sanctions and Iran’s economy will now open up. That’s still about 600,000 a day more than the average of 31.7 million required in 2016.

The removal of Iranian economic and financial sanctions on Saturday has heightened concerns centered on the oil glut, and driving the Brent crude price Monday to its lowest level since 2003, Kallanish Energy learns.

Recent diplomatic tensions between Iran and Saudi Arabia made the situation even more complicated.

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”. Production including returning OPEC member Indonesia fell by 210,000 bpd to 32.18 million bpd in December, the report said, citing secondary sources.

“With the downtrend to continue we anticipate more spending cuts, though yet to be issued by many oil majors who are pressed to maintain their dividend payouts, and perhaps further impairments as last year’s write-downs could have been insufficient as oil price dips further south”, it pointed out.

The lifting of economic sanctions on Iran came at a very bad time, when the oil market is already burdened by a China slowdown, rising OPEC supply and warm weather from El Nino. Tehran has pledged to boost production further in the coming months.

As holder of the world’s fourth-largest reserves of crude and biggest deposits of natural gas, the nation gains immediate access to about $50bn in frozen accounts overseas, funds the government says it will use to rebuild industries.

Since the sanction was lifted, oil prices hit their lowest since 2003 on Monday. Brent crude, an worldwide benchmark, closed at $28.94, down $1.94.