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Bad News For Oil Sector … Iran Is Coming
OIL prices will soon start weakening, and OPEC-Plus will have to make necessary adjustments in consideration of the lifting of US sanctions on the Iranian oil exports. Importing Asian countries and international banks must be ready to receive proceeds from consumers. The oil markets must be prepared to take additional oils from Iran, which could add another two million barrels per day within the next six months.
With the lifting of the sanctions, OPEC-Plus must adjust and bring down its volume to make room for Iran. The question is whether the Plus part will participate in the reduction or pass it fully to OPEC to take care of the matter alone. The Iranian oil volume is not small and can go up to 4.2 million billion from its current production of 2.2 million barrels per day. OPEC must be ready to adjust not only its volume but also to losing some of its market share in Asia including Taiwan, South Korea, and Japan. This however is under the assumption that there will be no improvements in the global demand for oil, and it must be increased by more than four million barrels per day in the coming months. With the arrival of additional oil, the oil price will likely go below $66 in the coming months.
Even though it was expected to reach the level of $70 a few weeks ago, oil prices were hit hard by the increase in the COVID 19 cases in India, which dampened any hope of quick global economic recovery, and hardened the oil demand. The demand for oil is still weak; it is less by about six million from its peak of 100 million in 2019. Recovering from this lost volume will take a long time. Some of it may be gained by the mid of the fourth quarter if international commercial fl ights and commercial activities resume from the USA all the way to China through all the countries in between, and provided no new variance appears on the horizon. OPEC and its Plus partners are going to face a hard time with the arrival of Iranian oils. They will have to make necessary adjustments to retain the oil price at $60 level.
SOURCE ; ARAB TIMES
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