By Zack Colman
Iranian oil will push prices down for a prolonged period as sanctions on the country end as part of the nuclear deal reached Tuesday, energy experts said.
Iran could boost production from 2.9 million barrels to 4.2 million barrels per day by 2020, said Sara Vakhshouri, an energy analyst with SVB International. Iran also could immediately lower prices because it has stored about 37 million barrels of oil and condensate, a form of light oil, on offshore tankers that it can quickly release to the market.
The immediate price effects were mooted largely because markets had been expecting the sanctions to be lifted, said Sam Ori, executive director of the Energy Policy Institute at the University of Chicago. Brent and West Texas Intermediate prices fell with the news of the deal Tuesday morning but recovered to post gains as of 4 p.m., with the former hovering near $58 per barrel and the latter near $53 per barrel.
Member states of the Organization of the Petroleum Exporting Countries have been far out-producing their quotas. Ori noted the oil market demand for supplies from the cartel was 28.3 million barrels per day for the second quarter, but actual OPEC output averaged 31.5 million barrels. Adding Iran back to the equation likely will extend the bout of low prices for at least another year, he said, with Brent prices remaining around $50 per barrel.
“I do think this is likely to contribute to an extended period of low prices at this point. The deal comes right on the heels of a fairly bearish [International Energy Agency] oil market report that shows the global oversupply hit unexpected highs in the second quarter, and suggests that the glut will not really unwind anytime in 2015 or 2016,” Ori said in an email…
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