Now that the Iran nuclear deal has been signed and sealed, the key players in the oil industry are anticipating what this would mean to the global oil markets. Iran has been unable to market its oil to the US since 1995, but with the imminent lifting of the oil sanctions, there seems to be new pictures to look forward to.
Gas prices could fall as low as $2
Drivers and motorists would celebrate lower gas prices at the pump, although oil analyst Tom Kloza thinks this would happen later this year and not immediately after lifting the sanctions. Kloza said that “once we get past Labor Day, we should see gas falling by 10 to 15 cents a month.” A gallon of regular oil is now $2.78 at US pumps and it had fallen below $2 last year, but Kloza predicts that “by December a lot of places are going to see gasoline at $2 or less.”
Iran’s Fresh Supply to the World Market is Off-Timing, Adding Further to the Oil Glut
Now with a surplus of 2 million barrels of oil in the world market and leading oil-producing countries like United States and Saudi Arabia, oil experts believe that Iran’s entry to rejoining the oil market is just bad timing. The slowdown in Europe and China’s economy also contributes to the lessened demand of the already overwhelming supply of oil.
There’s already a glut of supply even without Iran’s oil. OPEC and US are already producing more oil than we can manage to consumer. With Iran entering the picture, EIA predicts and additional 800,000 barrels of oil per day to the growing supply while there could be 30 million barrels of oil from Iran left for storage.
Iran’s Additional Oil Supply Would Increase Selling Pressure
Iran has as much oil and natural gas to be able to stand at par with Russia and Saudi Arabia. Energy analysts this would not be ramped up in full force until the middle of 2016, it would only be a matter of tapping the reserves before Iran would be able to make its oil available for the market.
Iran has been exploring the possibility of reviving shut wells while the engineers are getting acquainted with the technology. By the time (mid-2016) that Iran is able to make a full comeback to the oil market, it is predicted that oil supply would have declined while there will be more demand from the oil-consuming nations like Russia. Iran officials believe that selling oil at $70 per barrel would be good place to start.
Iran’s potential to flood the market with more oil has been a cause of worry among many oil and gas organizations in the US. Since the silent oil price war between OPEC and the US last year, numerous oil rigs have been shut down; employees laid off and oil price dipping into $50 range. With more oil into the picture and the US unable to export its surplus supply, having lots of Iranian oil is not good thought.
Meanwhile, Iran may have to bank on a lot more investments and technologies to keep its oil wells up and running and make sure it is keeping its promise in the nuclear deal.