Brent Oil price down to $28 as Iran increases output amid global glut
Brent oil drops further down to only $28 per barrel as Iran increased its output after international sanctions against the country were lifted. Production for exports will increase by 500,000 barrels a day.
Bloomberg News reported that Iran's deputy oil minister for commerce and international affairs, Amir Hossein Zamaninia, announced Sunday that the OPEC producer county will start to increase production and exports by as much as half a million barrels every day after the sanctions were lifted. According to officials from Iran's petroleum ministry and national oil company, the country is simply trying to win back its lost market share and has no intentions to pressure prices.
According to BBC, the nuclear watchdog, the International Atomic Energy Agency (IAEA) found that Iran has complied with the requirements of reducing its numbers of centrifuges and reactors that can be used for developing nuclear weapons. This has lifted the international sanctions against the country, unfreezing billions of dollars worth of assets and allowing the nation to sell oil internationally.
"Uncertainty remains regarding how much oil Iran can bring on in the short term as well as their re-entry strategy," said Asia Pacific IHS Inc. vice president Victor Shum. "Export levels could feasibly ramp up quite quickly due to releasing this pent-up supply."
Meanwhile, Reuters wrote that many fears that a global economic downturn would happen as Asian shares continues to decline due to weak US economic reports and the significant drop in oil prices. The Japanese Nikkei is expected to drop two percent, while Australia shares went down 1.7 percent Monday.
Saudi Oil Minister Ali al-Naimi expects the opposite, saying prices will increase, and that producing nations will help each other to attain renewed stability. However, this is not the case according to Hong Kong-based Nomura Holdings Inc. analyst Gordon Kwan, who said that Iran's exports will lead to the further decline of oil prices to as low as $25 per barrel.