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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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Is This Reformed Nation the Reason For Oil's Fall?

Falling oil prices have been one of the biggest news items in commodities markets lately.

West Texas Intermediate crude has plunged from near $110 per barrel as recently as June, to near $80. A fall that has spooked producing companies and investors alike.

A variety of reasons have been offered for the decline. Including overproduction from key nations like Saudi Arabia, or falling demand in places like Europe and Japan.

Related: Oil Market Complexity Means Prices Make The Story

But news this week suggests that another key factor may be in play here. The return of one of the world's most critical producing nations to the market.

That's Iran. An OPEC member that has seen its oil exports crippled the last few years by international sanctions.

That situation appears to be changing however. With Reuters reporting that international purchases of Iranian crude have been on the rise--especially in key consuming centers like Asia.

Purchases of Iranian oil by China, Japan, India and South Korea jumped 19.6% during the first nine months of 2014, as compared to the same period last year. With buying from these four nations averaging 1.14 million barrels per day.

China led the way, taking up an average of over 570,000 barrels per day so far in 2014. More than 33% higher than the total purchased by Chinese buyers last year.

Related: 2014 May Be A Crucial Year For Iranian Oil

The key to the increase in exports was a loosening of international sanctions against Iran last November. And the export numbers could rise further.

That's because the global community is considering a full lifting of sanctions, if Iran complies with certain terms currently being negotiated. A move that could see crude exports return to near Iran's pre-sanctions levels--around 2.5 million barrels per day, or 150% higher than today.

Rising output here may thus be putting a stealth drag on global energy prices. Watch for further developments on the lifting of sanctions--if such an event does materialize, we could see a lot more downward pressure on oil prices than most observers are expecting.

Here's to coming back to market,

Dave Forest

More Top Reads From Oilprice.com:

- The Oil Weapon: A New Way To Wage War

- Iran Says Oil’s Price Drop No Threat, Won’t Demand Production Cut

- How And When Will Saudi Arabia Respond To Low Oil Prices?


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