Iran to boost oil output by 500000 barrels

Oil prices hit their lowest since 2003 on Monday, as the market braced for additional Iranian exports after the lifting of sanctions against the country over the weekend. Crude oil prices continued to slide today with the Brent and West Texas Intermediate (WTI) benchmarks touching levels below $30 a barrel mark.

Oil prices plunged below US$28 a barrel early Monday, hitting energy firms and extending losses across Asian markets after sanctions were lifted against Iran, allowing the key producer to resume crude exports.

Iran is expected to further flood the oil market from this week, exacerbating the global oversupply problem that has sent prices diving over the past couple of weeks.

At the same time, demand has fallen because of a slowdown in economic growth in China and Europe.

The prospect of Iran doubling its crude oil exports has provoked the continuing fall in oil prices with UK Brent crude closing trade on Friday below $29 a barrel.

If the prediction is accurate, it would make a victory of sorts for OPEC’s strategy of keep the oil flowing despite crude sliding from above $100 in 2014 – to defend its market share. Saudi Arabia’s stock market plummeted more than 5 percent alone.

While the Iran news was zero surprise for this market, that doesn’t mean it won’t be an excuse for bears to push oil prices even lower, said analysts. “The downward movement in oil prices was exaggerated due to the current environment that we are seeing in the financial markets”.

Meanwhile, a type of low-quality American crude oil is now being sold at a “negative price”.

Hellenic Petroleum is estimated to owe $550-600 million for oil it bought from Iran but was unable to pay when the global embargo was imposed, a source close to discussions between Iran and Greece told Reuters last month. While new projects providing 2 million daily barrels will start in 2016, “the decline in maintenance capex should also start to show through higher decline rates and possibly greater supply outages”.

Some analysts suggest that the return of Iranian oil exports has already been priced in, while others disagree. But the IEA estimates that 400,000 to 500,000 barrels a day is more likely; some experts see 300,000 or so barrels coming in during the next six months.

USA output will average 13.50 million bpd this year, the report said, down 380,000 bpd from 2015 and the largest drop outside OPEC.

Oversupply from OPEC could increase further as Iran plans to restore production following the removal of sanctions.

“The legs of Iran’s economy are now free of the chains of sanctions and it’s time to build and grow”, Mr Rouhani tweeted on Sunday.