TEHRAN, IRAN — Iran is aiming to increase its oil production by 500,000 barrels per day now that sanctions have been lifted under a landmark nuclear deal with world powers, a top official said.
In comments posted on the Oil Ministry’s website Monday, deputy oil minister Roknoddin Javadi said Iran is determined to retake its share of the oil market, which plunged after crippling sanctions were imposed in 2012.
The U.N. nuclear agency certified Saturday that Iran has met all its commitments under last summer’s agreement, prompting the lifting of a broad range of economic sanctions, including those covering the oil industry. Other sanctions unrelated to Iran’s nuclear program remain in place.
Iran formerly exported 2.3 million barrels per day, but its crude exports fell to 1 million in 2012. Iran’s total production currently stands at 3.1 million barrels per day.
“In the wake of removal of sanctions, Iran is prepared to increase its crude output by 500,000 barrels per day. Today, a government order was issued to increase production,” Javadi said, adding that it will take a year to return to pre-sanctions production levels.
Oil prices have plummeted to less than $30 a barrel, the lowest in 13 years. Javadi said an oversupply of some 2 million barrels a day is to blame.
Lifting the embargo on the world’s seventh-largest oil producer on Monday reinforced
expectations that prices will remain low as supply overwhelms demand. Benchmark U.S. crude was down 1.6 percent to $28.94 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell to $29.42 a barrel Friday. Brent crude, a benchmark for international oils, fell 1.1 percent to $28.62 per barrel. It fell to $28.94 in London on Friday.
Barclays analysts Alia Moubayed and Michael Cohen wrote in a research note to investors that the anticipated ramp-up in Iranian production comes “at a very bad time” for the oil market, given the existing pressure on prices.
“It is too early to say what kind of market impact Iran’s return will have or how much of Iran’s return is already priced in,” they wrote. “Our view is that Iranian wellhead production and sales from existing onshore and offshore storage will surprise the market initially, as the country shows its muscle, leading to downward price pressure,” they added.
They estimate that Iran already has some 46 million barrels of petroleum pumped and stored offshore and an additional 30 million to 40 million barrels reportedly in storage on land. They expect it will try to reclaim lost market share in Europe quickly, but getting additional sales out of customers such as India and China could prove trickier.
Iran has vowed to boost crude exports and retake its market share even if prices fall further, saying fellow OPEC members exporting more oil than their quota should be blamed. Iran’s regional rival Saudi Arabia is OPEC’s largest producer.
The Organization of the Petroleum Exporting Countries on Monday flagged the potential for a recovery, saying the market would start to rebalance this year as weak prices take their toll on production outside the cartel.
Although OPEC acknowledges more than 2 million barrels a day of new projects are still planned to go ahead this year, the organization expects non-OPEC output to fall by almost 700,000 barrels a day in 2016 as the effects of lower capital spending are felt.
The U.S. is expected to see the biggest decline in production, with output forecast to fall by nearly 400,000 barrels a day, but OPEC said places such as Canada, the North Sea, Latin America and parts of Asia are also particularly vulnerable.
OPEC’s oil production, on the other hand, remains elevated, despite declining by 200,000 barrels a day last month, according to secondary sources. The group’s output — including newly reinstated member Indonesia — fell to 32.2 million barrels a day in December, led by lower production in Nigeria, Saudi Arabia and Iraq. The group’s output still remains above the anticipated demand for its oil, though, which OPEC sees rising by 1.7 million barrels a day to 31.6 million barrels a day this year.
