Fra Moodys:
Over the past year we have cited the prospect of oil supply from Iran returning to global markets as a major contributor to current low oil prices. We expect that Iran (unrated) could add more than 500,000 barrels per day (bpd) to global oil markets in 2016 in addition to the 1.2 million bpd Iran exported in 2015, based on existing capacity and the likely buyers of the crude.
Moreover, we do not anticipate Iran significantly exceeding this level over the next 12 to 18 months through mid-2017 due to market demand for Iranian crude, the asset profile of Iran’s oil fields, and remaining political risks to the nuclear agreement. The additional supply from Iran, which re-enters the world oil marketplace following the lifting of secondary economic sanctions by the US, will contribute heavily to a global oil oversupply that is already likely to outpace demand for at least the next few years.
But Iran’s difficulty securing additional customers, and the procurement needs of its current customers, will constrain its ability to sell additional crude in global markets. On 16 January, the International Atomic Energy Agency (IAEA) verified that Iran had complied with its nuclear-related obligations as part of the July 2015 Joint Comprehensive Plan of Action (JCPOA) framework. Iran had agreed to the JCPOA with the signatories of the P5+1 agreement—China, France, Germany, Russia, the UK, and the US.
On “Implementation Day” of the accord, which followed two years of diplomacy, multilateral sanctions that had effectively targeted Iran’s crude exports were lifted. Iran Seeks to Regain Customer Base Increased global production continues to outpace growth in oil consumption, even with moderate consumption growth by major consumers such as the US, China and India (see our Sector Comment, Oil and Natural Gas Industry – Global: Increased Supply and Concerns About Demand Growth Drive Prices Yet Lower, 21 January 2016).
World production now exceeds demand by about 2 million bpd, adding to already high global oil stocks. Meanwhile, OPEC and many non-OPEC oil producers battle for market share by continuing to produce at capacity. Iranian crude will likely replace a 500,000 bpd decline in US production in 2016 in global oil markets
