With Iran back, OPEC may boost output to another record

Iran can boost output by 500,000 barrels a day within one week after sanctions are lifted, Oil Minister Bijan Namdar Zanganeh said earlier this month. In a June survey, the average year-end forecast of participants was that West Texas Intermediate crude would be at .80 per barrel.

The basket of 12 crude oils of the Organisation of Petroleum Exporting Countries (OPEC) closed at $46.62 for a barrel of almost 160 litres on Friday, compared to $47.28 on Thursday.

With a relatively firm grasp on the elasticity range of oil production from the U.S. and OPEC for the next few years, it is time for all of us to turn our attention and quest to understand when, how or if oil prices will rise to the demand for crude oil.

OPEC pumped 32.1 million barrels a day in July, the 14th consecutive month that the 12-nation group has produced more than its collective target of 30 million barrels, data compiled by Bloomberg show.

“For the last 40 years, OPEC has been the major player in setting global oil prices because of its location within OPEC Countries, most specifically in the Middle East. It has been the “swing” producer, increasing its production when markets are tight, and reducing quotas when there is over-supply”, Appert said.

Opec held meetings in November 2014 and June 2015 where it decided to maintain its level of production in order to keep its market share which has led to the price of oil dropping by more than 50 per cent.

The domestic demand of oil comes from local oil refineries and seasonal power demand. Saudi Arabia reduced its production to 10.50 million bpd in July, while the other members of OPEC continued pushing higher production. Although the count is still lower than last year, it is still the highest rig count since May. To the extent the market expects the nuclear deal to be signed, resulting in an extra 600,000 to 1 million barrels per day of supply from Iran within a year or so, this is likely already factored into today’s price. For the past four consecutive weeks, rig count has consistently increased. But the shale producers have consolidated into bigger companies and increased the efficiency of their production processes, and U.S. oil production is actually continuing to grow this year.

After having dropped below the psychological $50-a-barrel-mark earlier in the week, the Indian basket of crude oils closed below $49 on its last trading on the eve of Independence Day.

The weekly update is a crucial barometer of crude demand in the world’s biggest economy – which is also a large producer of shale oil. The higher value of dollar, unstable stock markets in China and financial crisis in Greece have also added negative sentiments in the oil market.