Baku, Azerbaijan, Nov. 25
By Aygun Badalova - Trend:
Most of the sanctions that restrict Iran's oil production and exports currently will be lifted at the end of this year and exports will increase in the first quarter of 2016, analysts of the US JP Morgan bank believe.
"Crucial to our balances are the speed and size of this return, plus how Iran handles the sale of the near 40 million barrels of crude and condensate floating offshore Iranian ports currently," analysts said in a report obtained by Trend.
Moreover, analysts cap Iranian increase in supplies at 400,000 barrels per day year over year, well below the 1 million barrels per day that Iranian energy officials have repeatedly claimed is their goal.
Iran currently produces more than 2.8 million barrels of crude oil per day. The country is to resume oil production to pre-sanctions level in mid-2016 at 3.8 million barrels per day.
Iran said the country is planning to increase its oil export from one million barrels a day to 1.5 million in the course of seven days once the sanctions are lifted. After that, the country will increase its export to two million barrels per day during the course of a six-month program.
Longer term, JP Morgan analysts expect Iran to increase production more meaningfully, however they think it is premature to expect the build-up of output to occur next year beyond restoration of offline capacity.
"While we assume that once the IAEA report is agreed, most likely in December, it will pave the way for the rapid removal of sanctions, there remains a risk that events progress more slowly than we have anticipated," analysts said.
They said that if, as claimed, Iran can increase production to close to 3.9 million barrels per day by March 2016, then it implies their market balance would be far looser than the 1 million barrels per day deficit currently expected in the second half of 2016.
"Obviously this would have a very bearish impact on end-2016 prices with the prospect of no material tightening of oil markets until 2017," analysts said.
"Iranian supply growth in the long term is certainly going to be substantial, given the resources/geology of the country, and we think that given time and the necessary investment, production will increase," analysts noted.
