Iran and the Outlook of the Global Oil Market

Radio Farda - The price of crude oil in various global markets has once again entered a downward trend after several weeks of relative increase. Mir Ali Hosseini asked Fereydoun Khavand, an economist based in Paris, about the reasons for this renewed price drop: Fereydoun Khavand: The improving situation of the global oil market, which had created hopes in exporting countries, did not last long and the price decline resumed. The price of a barrel of the OPEC oil basket, which rose above fifty dollars in early February and even reached 56 dollars, has fallen back below fifty dollars this week. The price of oil in the New York market also plummeted to its lowest level in six years, reaching about 43 dollars per barrel. The reason for this situation, as seen in the latest report from OPEC, is that the fundamental data of the oil market has not changed, and at least for the next few months, the price of this commodity will remain low. Contrary to what Saudi Arabia believed, unconventional or shale oil production in the U.S. continues to increase, which naturally lowers prices in the global oil market. Another important point is that strategic reserves in U.S. oil storage have reached the highest level in 33 years, and the release of this news was one of the factors for the recent drop in oil prices over the past few days. Bijan Namdar Zangeneh, Iran's oil minister, recently stated that if sanctions are lifted, Iran is ready to increase its oil exports by one million barrels per day within a few months. Will the prospect of increased Iranian oil exports cause prices to fall further? Some oil market experts say that the current progress in negotiations over the nuclear issue and the possibility of increased Iranian oil exports are among the reasons for the recent drop in oil prices. According to the latest statistics from OPEC, Iran currently produces 2 million 778 thousand barrels of oil per day, of which about one million is exported. With this level of production, Iran, which was not long ago the second-largest oil producer in OPEC, has become the fifth-largest producer in the organization, and half of its export markets have fallen into the hands of competitors due to sanctions. The potential lifting of sanctions opens the way for Iran to try to regain its lost oil positions. Reuters reported on Tuesday, citing experts, that even if a complete agreement is reached on the Iranian nuclear issue by June, Iran's oil exports will not increase until early next year. This assessment is likely correct, as the process of lifting sanctions and also regaining lost oil markets by Iran will not be immediately feasible and will require several months.