Not too long ago, analysts had to allay fears that the tense relations between Iran and the United States would cause a sudden spike in the price of petroleum. Now, the U.S. and world oil markets are faced with an unusual reversal of the scenario.
Image source: WashingtonPost.com
The continued growth of supply, which has produced a glut in world petroleum markets, drags into more uncertain future with the landmark agreement between the United States and Iran regarding the latter's nuclear policy. With the loosening of international restrictions surrounding Iran's oil exports to the United States and the European Union, the oil industry faces a new challenge that could have several repercussions on the oversupplied petroleum market.
It will be a matter of months before Iranian oil fully penetrates the world market as it did before, the effects of which would largely be dependent on how long the supply glut continues until then, and whether Iran's production would increase not long after.
On the other hand, there remain a few who are convinced that the arrival of oil from Iran would not significantly affect the price of oil. Iran's present production would not have a sustained impact on benchmark crude oil price as it represents only a third of the world's daily consumption. Likewise, an increase in production from the country could trigger a chain reaction that could cause prices to drop significantly.
Image source: TheIranProject.com
Long-term investors, on the other hand, could see no cause for worry about the prices. Although the expected increase in demand in the season is not considered spectacular, there remains hope, based on previous trends, that gasoline prices (and, by extension, petroleum) would eventually stabilize as demand increases.
Brian Alfaro is the founder and president of Primera Energy LLC, a company based in San Antonio that runs operations in the Eagle Ford Shale and Barnett Shale. Visit this website for more on his company and its guiding principles.
No comments:
Post a Comment