FXStreet (Mumbai) – Iranian crude oil production is likely to increase in 2016 but will take a number of years to reach its previous peak, ratings agency Fitch said in a recent report.
Iran’s oil exports at the moment are around 1.1 million barrels per day (mmbbl/d) versus levels of around 2.5mmbbl/d before 2012.
Key Findings:
“Details of the condition of Iran’s production infrastructure are sketchy, but with limited investment as sanctions have been increased, it is likely that only a portion of this capacity can be brought back on-line without material investment,”
“We would expect to see some increases in production throughout the course of 2016 but that this would be less than half of the full 1.4mmbbl/d that was lost.”
The report also said that the additional crude in 2016 will likely “delay the recovery in oil prices somewhat, but we still expect an improvement in prices next year as demand grows and the cuts in investment since the price collapsed show through in areas other than U.S. shale.”
“However, we believe it will take two-three years for prices to recover to their marginal cost of around USD80 (Brent) a barrel. A wild card is the estimated 40m barrels of crude Iran has in storage – we believe this will only be offloaded gradually into the markets to maximise value.”
(Market News Provided by FXstreet)