The price has been coming down for several months because production from Saudi Arabia is strong, from Iraq it’s strong, from Russia it’s quite strong. From the US there’s been a little bit of a fall but not very much.
Market makers have been anticipating Iran sanctions to be lifted, but did not know when until quite recently.
Part of the price fall has been down to the anticipation of the removal of sanctions. Now that this has happened there will be a further fall because Iran will be able to put quite a bit of oil on the market in the short term. Iran has a lot of oil stored in tankers – about 12 million barrels of oil and 24 million barrels of condensate.
In terms of production, it will be some months before we see a worthwhile increase because Iran had to curtail production for quite a long time. It’s likely that wells and fields will need to be refurbished before a big increase in production can take place.
The outlook for the price is that it could be lower but not much below what we have now.
Next year the production capacity across the world could be reduced. So many investment projects have been put on hold. By 2017 it could well be that there is a shortage of capacity but there are a lot of ifs and buts.
A lot depends on Iran. Iran wants to attract foreign investors but that will take some time. Market makers will be keeping an eye on that.
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