• 5 minutes China Faces Economic Collapse
  • 8 minutes ZeroHedge: Oil And Gas Bankruptcies To Accelerate As $137 Billion Debt Matures Over Next Two Years
  • 11 minutes Trump Will Win In 2020
  • 14 minutes Oil Production Growth In U.S. Grinds To A Halt
  • 3 hours The Belt & Road Initiative: A Wolf in Sheep's Clothing?
  • 1 hour Drone attacks cause fire at two Saudi Aramco facilities, blaze now under control
  • 8 hours How OPEC and OECD play their role in setting oil price in light of Iranian oil sanction ?? Does the world agree with Iran's oil sanctions ???
  • 5 hours Cost of oil
  • 41 mins Democrats and Gun Views
  • 15 hours Swedish Behavioral Scientist Suggests Eating Humans to ‘Save the Planet’ from Climate Change. What could possibly go wrong?
  • 15 hours Trump Orders Biofuel Boost
  • 10 hours Iran says tanker oil sold at sea, buyer sets destination
  • 51 mins US and China are already in a full economic war and this battle for global hegemony is a little bit frightening
  • 19 hours Used Thin Film Solar Panels at 15 Cents per Watt
  • 19 hours Green New Deal Preview in Texas Town
  • 16 hours “Who’s going to bail out the Central Banks?”
  • 33 mins Iran in the world market
Alt Text

Iran Has Perfected The Art Of Hiding Its Oil Tankers

Despite sanctions and mounting geopolitical…

Alt Text

OPEC+ Boasts 159% Compliance With Oil Production Cuts

The OPEC+ coalition of producers…

Michael McDonald

Michael McDonald

Michael is an assistant professor of finance and a frequent consultant to companies regarding capital structure decisions and investments. He holds a PhD in finance…

More Info

Premium Content

Iran Surprises OPEC With A Further 250,000 Bpd Increase

President of Iran, Hassan Rouhani, was poised to announce on Sunday that the nation has increased oil production by 250,000 barrels per day. This was accomplished through the creation of three new fields west of the Karoun River. The addition in production was highly unexpected, especially to neighboring OPEC nations. As of this past Wednesday, Brent crude oil futures have dropped a substantial amount to under $44 per barrel.

Three publicly traded companies on three separate exchanges have paid as much as $3 billion to obtain these fields. Sinopec from China has acquired the largest, producing 115,000 barrels per day. China’s National Petroleum Corporation bought the second largest field and the third was given to Persia Oil and Gas Development of Iran. All three of these companies stand to profit from these fields. Iran is in the process of ramping up production to reach their prior unsanctioned levels, which would place the oil majors in a crucial position to grow.

Total SA has also entered into an agreement with Iran, reinvesting efforts and $4.8 billion into projects previously explored to the sanctioning of Iran. Total plans to produce 2 billion cubic feet of natural gas per day at the south pars gas field offshore. Total is simply another one of the firms that will likely profit from Iran’s expected rapid growth.

Iran only wishes to return to their production level of 12 percent of OPEC’s total production. As of October, OPEC’s production levels were at 33,643,000 bpd and Iran produced 3,690,000 bpd, or nearly 11 percent. Last month, Iran would have needed about 350,000 bpd more in oil to reach their goal. The 250,000 bpd created from these three new fields will put the country close. President Rouhani wants to increase production of this new region to over one million bpd, a conceivable figure.

Saudi Arabia, Iran’s closest rival in oil production, is unhappy to see Iran’s advances. More competition means fewer profits for Saudi Arabian oil majors like Saudi Aramco. The company is privately owned but there is potential for an IPO in the next year or two. It would be in investor’s interest to short their currency, the Saudi Riyal, while holding long positions in the companies maintaining the three new fields mentioned above. Related: ExxonMobil Is Digging Its Own Grave

OPEC is planning on excluding Iran from the production cut to allow them to regain their market share. However, if Iran is to achieve their ambition faster than expected, OPEC may consider including them. OPEC is meeting once more on November 30th to continue discussing the planned cuts. OPEC has mentioned previously they wish to limit oil production to less than 33 million bpd, a number that is becoming more and more unlikely as production further accelerates.

A continued inundation of supply for crude oil will only lower the price of oil further. Economists are skeptical that a deal will be approved at the end of the month meaning oil prices could fall as low as $40 per barrel. If a deal were to remarkably emerge, this could result in a price surge. As we get closer to the meeting, investors should prepare their portfolios with straddles or, for the confident speculator, a spread in the direction of their interests.

By Michael McDonald of Oilprice.com

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage



Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play