Market Watcher Flags Rising Iranian Oil Production

(The views and opinions expressed in this article are those of the attributed sources and do not necessarily reflect the position of Rigzone or the author)

One of Rigzone’s regular market watchers takes a look at Iran’s oil production, the state of U.S. crude stockpiles, OPEC plans, the oil price and more. Read on for more detail.

Rigzone: What were some market expectations that actually occurred during the past week – and which expectations did not?

Barani Krishnan, Senior Commodities Analyst at uk.Investing.com: U.S. crude stockpiles fell for a third straight week as forecast and OPEC pressed ahead with the idea that it will resort to an October production cut as well, though that messaging was delivered by the Russians instead of the Saudis.

Rigzone: What were some market surprises?

Krishnan: What really took the cake this week was the revelation that Iranian oil production has been rising and rising the past two years and now stood at 3.2 million barrels per day versus a Trump-era low of 2.4 million.

The Iranians, given the opportunity, could upset the Saudi applecart on oil pricing. Iran’s all-time high was 4.8 million barrels per day in 2017, a year before Trump’s sanctions came on. There’s no certainty, of course, that they will get there. To produce more oil, the Iranians have to invest more in drilling and infrastructure, and Tehran’s finances are still recovering from the extensive damage done by years of sanctions.

But $80 and above for Brent, compared with pandemic-era lows of $40 and under, are a bonanza for Iran and could help it quickly scale its production. Also, at $90 or closer to $100 a barrel, Tehran could do what Russia until recently did - discount its own barrels by $20 or more. And waiting to grab that off them will be the same Chinese and Indian buyers who have stockpiled enough cheap Russian oil over the past year that they are slowly working off their inventory despite the tight global supply situation.

Rigzone: What developments/trends will you be on the lookout for this week?

Krishnan: Saudi obsession for $90 and above for a barrel of Brent, which settled above $88 on Friday, looked achievable. Yet with Monday’s Labor Day holiday signaling the start of the seasonally low fall season for oil consumption, some giveback on pricing may be due before the market gets too far ahead.

To contact the author, email andreas.exarheas@rigzone.com