Oil stays under pressure as Iran orders sharp rise in crude output

Goldman Sachs said that Iran’s production would rise by 285,000 barrels per day (bpd) year-on-year in 2016 while BMI Research said the rise would by 400,000 bpd.

USA crude futures were trading at US$29.00 a barrel by 0105 GMT, down 42 cents from their last settlement.

Iranian officials promised to increase production even further, to an additional million barrels a day by the end of the year.

Brent crude rebounded on Tuesday from 12-years lows after data showed record demand in China, but a warning by the world’s energy watchdog that the market could “drown in oversupply” limited the global benchmark’s gains and sent USA crude down to its lowest since 2003. While the EIA forecasts that Iranian production will increase by 300 kd/d in 2016, the Iranian government is way more ambitious, with the stated goal of increasing production by 500 kb/d within a week of sanctions being lifted and by 1 mb/d within six months.

The International Energy Agency says oil prices may fall further this year due to low demand, warm winter weather and an oversupply of crude. Since January, the prospect of the lifting of sanctions on Iran accelerated the rout.

With the Iranians been able to deliver oil to the market fairly soon, the reality is that the overproduction of crude oil will continue.

But Brent struggled to break back above $29 a barrel as Iran’s return to world oil markets weighed.

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. The dollar is widely used for oil trading.

An OPEC report released Monday indicated that the group expects low global prices, which have fallen 70 percent since 2014, to force its rival producers, like the United States, to curb production enough to eventually reduce the glut that has driven prices down. Lower commodity prices, including oil, partly reflect weakening demand itself. The country now produces 2.8 million bpd and exports just over a million.

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

While supplies outside OPEC proved “resilient” for most of last year, they shrank on an annual basis in December for the first time in three years, according to the IEA.

A Kuwaiti trader follows the stock market activity at the Kuwait Stock Exchange in Kuwait City as share prices in the energy-rich Gulf states nosedived yesterday amid chronic oil concerns.