Iran’s Crude Oil Production Is Important for the Oil Market
Iran’s crude oil production
Iran is OPEC’s third-largest crude oil producer. The EIA estimates that Iran’s crude oil production decreased by 5,000 bpd (barrels per day) to 3.83 MMbpd (million barrels per day) in February 2018—compared to the previous month. However, production increased by 35,000 bpd or 0.9% from a year ago. Iran’s oil production is near a nine-year high.
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Iran’s crude oil production increased by 1,035,000 bpd or ~37% from December 2015 to February 2018. Iran increased its production after the US lifted sanctions on the country in January 2016.
Brent and WTI oil prices have risen ~75% and ~67% since January 1, 2016. The United States Brent Oil ETF (BNO) and the United States Oil ETF (USO) follow Brent and WTI crude oil futures, respectively. BNO and USO have risen ~46% and ~12.5%, respectively, since January 1, 2016.
Iran and OPEC’s output cut deal
Iran supported extending ongoing production cuts until December 2018. OPEC allowed Iran to increase its oil production slightly to help it recover market share lost while the country was under US sanctions. Iran is allowed to cap crude oil production at ~3,800,000 bpd.
Iran and crude oil prices
Iran wants Brent crude oil prices at $60 per barrel. Saudi Arabia needs Brent oil prices at $70 per barrel, which we discussed in the previous part.
Iran is worried because higher oil prices could increase US shale oil production and cause oversupply in the oil market. Oversupply could pressure oil prices.
The EIA estimates that US crude oil production could hit a new annual record in 2018 and 2019 and pressure oil prices.
Iran’s crude oil production plans
Iran’s oil production averaged 3.5 MMbpd (million barrels per day) and 3.8 MMbpd in 2016 and 2017, respectively. Iran targets to increase its oil production to 4.7 MMbpd by 2021. An increase in production from Iran could pressure oil prices.
Next, we’ll discuss some crude oil price forecasts.