June 27, 2015

ONE TRADE DEAL AFTER ANOTHER:

How an Iran nuclear deal would impact oil prices (Nick Cunningham, JUNE 27, 2015, CS Monitor)

 Western sanctions have knocked 1.2 million barrels per day offline since 2012. Although estimates vary, Iran might be able to bring 400,000 barrels per day online within a few months, perhaps as much as 700,000 barrels per day by the end of the year, growing to well over 1 million barrels per day sometime in 2016.

Also, Iran has somewhere around 40 million barrels of oil sitting in storage, a lot of which could essentially hit the market as soon as sanctions are lifted. 

If news breaks that a deal is in hand, oil prices will sink on the expectation of this future volume, potentially dropping by $5 to $10 per barrel. And as Iran actually does ramp up output over time, and the rest of OPEC opts against cutting back to make room, global supplies will increase. That will keep a lid on future price gains and extend the current period of soft pricing.


OPEC's Crude Market Share Fell to Lowest Since '03 Last Year (Grant Smith, June 24, 2015, Bloomberg)
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The erosion of OPEC's dominance by surging North American shale oil prompted the group to abandon its decades-long role of balancing world markets in November. Guided by Saudi Arabia, the organization chose instead to maintain output and pressure higher-cost rivals to curb their production in the face of a global glut. The kingdom completed the most wells last year since 2008, and the increase from 2013 was the biggest in a decade in percentage terms.

Posted by at June 27, 2015 11:03 AM
  

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