Not everyone in the Organization of Petroleum Exporting Countries has the same ideas about what Iranian oil supply will do to the group’s market shares.
Predictably, Saudi Arabia is acting unconcerned, as the country is allowing oil prices to drop below $60 per barrel without batting an eye. Then again, the country is also trying to shut down the U.S. shale industry.
Some would say it worked, too—U.S. rig and well counts plummeted and production has slowed as well.
On the other hand, the poorer group members such as Venezuela, Algeria, Angola, and Libya would like to see prices rise again to a more “reasonable” range between $75 and $80 per barrel.
Unfortunately, oil prices are expected to stay just over $62 for the next year at least, based on estimates from French bank Natixis.
Iranian oil is fully expected to hit the global market after the end of this year now that the recent nuclear deal has been signed.
Although this doesn’t necessarily mean that the current glut will be affected immediately, there’s still a chance this new supply would push prices even lower in the future.
According to Renaissance Capital economist Charles Robertson, the Islamic republic could be exporting 2.4 million barrels per day by 2016. In an already over-supplied market, this could cause more friction between OPEC members trying to hold on to market shares.
“If Iran, Venezuela, Algeria, and Libya… enter into a dispute with the Gulf producers, then it could be the end for OPEC,” says head of Kuwait’s Al-Shall Economic Consultants Jassem al-Saadun.
The organization will have to hope that oil demand continues to grow and U.S. shale stays expensive, or else there will be no room for Iran’s supply when it hits.
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Until next time,
Keith Kohl
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