The end of the economic sanctions placed against Iran might shakeup the oil markets. On Saturday, the European Union and the United States lifted the sanctions against Tehran restoring the access of Iran to world markets.
Iran has prepared itself for the sanctions being lifted for a number of months and could return in quick fashion to the top ranks in global oil productions.
Prices of crude had plunged for a number of months dropping to under $30 per barrel and a surge of new oil exported by Iran would likely see crude prices fall even lower.
Analysts expect that Iran will add 600,000 to one million barrels more per day to its output of oil, but the leaders of the country as even more optimistic.
The country is aiming to increase its output to as much as 1.5 million barrels a day by the end of this year, taking its daily production to over 4.2 million barrels.
Tehran is in somewhat of a tricky situation. The more oil the country exports, the likelihood is more that oil prices will drop even further. Iran has rather low costs of production in comparison to other oil producing countries, but another drop in prices could put the country’s plans at risk.
Iran desperately needs a large number of investments in its oil infrastructure that is out dated.
Iran is an OPEC member and only a couple of years ago, OPEC countries would make adjustment to production to maintain oil prices at a level that earned them large sums of money.
However, that scenario is unlikely, as the boom in U.S., shale has forced the group to change that strategy to one of defending market share by increasing the amount of production.
Recent tensions diplomatically between Saudi Arabia and Iran made this situation that much more complicated. The Saudis are the de-facto leaders of OPEC and already is struggling to maintain market share and the ambitions of Iran would put an even bigger amount of pressure on them.
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