WTI and Brent hit fresh lows on Friday over persistent fears of oversupply. The latest thing to drag down oil is the prospect of Iran quickly returning some significant volumes of oil to the market.
That is because “Implementation Day,” the day that Iran fulfills all necessary requirements stemming from the historic nuclear agreement reach last year, is expected imminently. U.S. Secretary of State said on Wednesday that the achievement would be reached “within the next coming days.” The IAEA is expected to issue a report as soon as today that will affirm Iran’s compliance.
That means the sanctions on Iran could be lifted as soon as next week, and as such, Iran could quickly bring back some oil production and exports. Iran has promised to ramp up oil exports by 500,000 barrels per day almost immediately. Iranian officials have also said that within a year of the removal of sanctions, it could bring back 1 million barrels per day.
At the same time, Iran has dialed back the ambition in recent weeks, saying that it will only produce as much as global demand justifies.
For now, oil markets are taking in the news and expecting more price pressure. WTI and Brent dropped nearly five percent during intraday trading on January 15.
By Charles Kennedy of Oilprice.com
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