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10 Apr 2015
Period of low oil prices might become longer – KBC
FXStreet (Barcelona) - The KBC Bank Research Desk argues that the expected decline in US oil production might be offset by Iranian oil supply, implying that the period of low oil prices might become longer.
Key Quotes
“Yesterday, the oil price pared some previous losses as Iran’s leader Khamenei said that he expected all sanctions to be lifted at the time any final agreement was signed.”
“On the contrary, the US State Department reiterated that the sanctions would be removed gradually. This signals that though the framework agreement was reached between P5+1 and Iran last week, the final one that would result in instant increase in oil exports from Iran should not be taken as read.”
“On the other hand, if the final agreement was reached eventually, an impact on the oil market would occur in the period starting from the second half of the year and exports from Iran could grow to the extent of approximately 0.5-1 mbpd.”
“The timing is interesting as the increase could come precisely when the low oil prices should start to have a greater impact on the production growth rate in the United States.”
“In other words, the anticipated decline in oil production by the U.S. may be (more than) offset by increased exports from Iran. Thus the period of low oil prices may become longer.”
“However, as we noted above, we continue to perceive such a scenario rather as a downside risk for our base case, although its probability has significantly increased.”
Key Quotes
“Yesterday, the oil price pared some previous losses as Iran’s leader Khamenei said that he expected all sanctions to be lifted at the time any final agreement was signed.”
“On the contrary, the US State Department reiterated that the sanctions would be removed gradually. This signals that though the framework agreement was reached between P5+1 and Iran last week, the final one that would result in instant increase in oil exports from Iran should not be taken as read.”
“On the other hand, if the final agreement was reached eventually, an impact on the oil market would occur in the period starting from the second half of the year and exports from Iran could grow to the extent of approximately 0.5-1 mbpd.”
“The timing is interesting as the increase could come precisely when the low oil prices should start to have a greater impact on the production growth rate in the United States.”
“In other words, the anticipated decline in oil production by the U.S. may be (more than) offset by increased exports from Iran. Thus the period of low oil prices may become longer.”
“However, as we noted above, we continue to perceive such a scenario rather as a downside risk for our base case, although its probability has significantly increased.”