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The Nightmare of Iranian Oil

The Nightmare of Iranian Oil
November 08
09:23 2015

Oil prices are well below the $50 line and speculators are not expecting to see any change in this price, at least until the end of the first quarter of 2016. The real concern, however, is not the current price level, but rather the expected one in the near future.

With the sanctions lifted on Iran, Tehran is expected to join the oil production market, bringing global export levels to surpass a million barrels a day. This is a nightmare for oil producers, who are already facing a decline in global demand for oil.

Currently, Iran produces 2.8 million barrels a day, and it is expected to increase its production to reach more than 5 million barrels by the end of 2020. Iranian energy industry officials have already stated that they do not mind selling oil at low rates of $40-$50 per barrel, knowing that whey will pressure other oil producers to lower prices as well. In fact, members of OPEC – the Organization of the Petroleum Exporting Countries –will be likely forced to limit their exports, in order to control the plunging prices.

To make things worse, oil production is also on the rise in Iraq and Libya, making the challenge all the more difficult.   The fear is that Iran will try to show the world what it is capable of after the nuclear deal, producing oil beyond a sustainable level. From that point onwards it will be very difficult to control the falling prices of oil.

In short, Iran may very well become an OPEC nightmare. – Kamel Abdallah al-Harami

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