cheap oil will hurt Iran’s comeback

 

The following  article was published by Matt Egan on Money.com on the recent oil glut and the effect of falling prices in the region, especially on Iran.
Iran may be about to emerge from decades of economic isolation -- at an absolutely terrible time for an oil-producing country.

Years of painful economic sanctions by the West have ravaged Iran’s economy, sending unemployment and inflation soaring.
 Oil prices are tanking and may stay depressed for some time.
U.S. crude oil prices touched $41.21 a barrel on Thursday. That’s the lowest price since early 2009 and down 60% from June of last year.
The price crash is hurting oil-exporting countries of all stripes.
But Iran’s economy is coming off an extremely low base, after years of sitting in the penalty box. New oil exports won’t bring in as much money as it would like, but it would still be more than where it is currently.
Still, Iran is expected to pump oil ferociously in an effort to make up for lost revenue.
'Iran has been talking a big game. They will try to look like they are coming back to oil markets with a vengeance,' said Helima Croft, global head of commodity strategy at RBC Capital and a former analyst at the CIA.

Iran needs higher oil prices
One problem for Iran is budgetary. To balance its budget, Iran needs oil prices to be at least $130 a barrel, or more, according to a Deutsche Bank analysis from 2014.
That’s far higher than the prices listed in the budgets of Russia, Saudi Arabia and smaller countries like Kuwait and the United Arab Emirates.
One major reason Iran needs higher prices is because it has the second-highest population in the region.

Iran deal could worsen the oil glut
But adding a ton of new Iranian crude to the global oil market at a time when prices are at 6-year lows would only worsen the situation.
Already, there’s a huge supply glut, which helped cause the price meltdown in the first place. Iran will only add to the excess supply.
'We think it could be a bad couple of weeks for the oil market,' said Croft.

Cheap oil could slow investments in oil field upgrades
But cheap oil creates other serious headaches for Iran.
More than half of Iran’s oil fields are over 70 years old, according to Phillipp Chladek, an oil analyst at Bloomberg Intelligence. These mature fields need serious upgrades in order to operate. That’s one reason why analysts are very skeptical of Iran’s claims that within months of sanctions relief it can ramp up production by one million barrels per day.
'They will need investment in new fields. Right now they’re strapped for cash -- just like everybody else,' said Matt Bey, an analyst at geopolitical intelligence firm Stratfor.
But Iran may not be able to count on large Western companies for these much-needed updates. These companies are already dialing back spending due to the crash in oil prices. It’s possible that Big Oil may decide it’s not worth it to bet on a risky country like Iran in today’s depressed oil price environment.
'That’s going to hurt Iran the most,' said Bey.
Other analysts believe energy companies will not be able to resist the lure of Iran, which has 9% of the Middle East’s proven global oil reserves and 18% of its gas reserves. Major European oil companies such as Royal Dutch Shell (RDSA) and Eni (E) met with Iranian officials in Tehran earlier this year to discuss business plans.

Obama: Iranian oil, good, Canadian oil, bad, American oil, bad

President Obama’s confusing approach to energy encourages our enemies who shout “death to America” as it penalizes our closest allies and even our own job creators.
Iran’s participation in the nuclear negotiations netted a deal that allows it to resume oil exports. International sanctions have, since 2011, cut Iran’s oil exports in half and severely damaged its economy. Iran currently has about 50 million barrels of oil in storage on 28 tankers at sea.
It is believed that it will take Iran months to bring its production back up to pre-sanction levels. The millions of barrels of oil parked offshore are indicative of their eagerness to increase exports. Once the sanctions disappear — if Congress approves the terms of the deal — Iran wants to be ready to move its oil.
On July 17, the Financial Times (FT) reported: “The departure of a giant Iranian supertanker from the flotilla of vessels storing oil off the country’s coast has triggered speculation Tehran is moving to ramp up its crude exports.” The Starla, “a 2 million barrel vessel,” set sail — moving the oil closer to customers in Asia.
Starla is the first vessel storing crude offshore to sail after the nuclear deal was reached — which is, according to the FT: “signaling its looming return to the oil market.”
Already, before sanctions are lifted, global oil prices are feeling the pressure of Iran’s increased exports. Since the deal has been announced, crude prices have lost almost all of the recent gains.
While the Obama Administration’s actions allow Iran to boost its economy by increasing its oil exports, the White House hurts our closest ally but putting delay after delay in front of the Keystone pipeline, which would help Canada export its oil.
So, the Obama Administration lobbies Congress to lift the sanctions on Iran, a country that views America as The Great Satan while constraining Canadian and American oil. How is that in the “national interest?”
It appears we might just be living in a country founded by geniuses and run by idiots...morehttp://www.mojahedin.org/newsen/36394/Obama-Iranian-oil-good-Canadian-oil-bad-American-oil-bad