Published on : Apr 03, 2015
Thursday’s U.S. breakthrough in nuclear talks with Iran could potentially cause major changes in the global energy market in the long run. Energy experts however, have said that there will not be any major change in an already glutted global oil market for the next six months at the very least. Most experts said that the oil market will remain unchanged for a year.
Iranian exports of crude oil have fallen by over one million barrels per day after the 2012 sanctions placed by the European Union. This was more than 1 per cent of the daily global oil market supply. There is currently an excess of almost two million barrels of supply on the world market. Adding another million barrels of oil in the world market supply would put increasing pressure on the price of crude oil around the world. The oil prices have already fallen nearly 50 per cent since June 2014.
Although the agreement drawn in the Switzerland meeting was still tentative, it caused traders to sell off their futures in oil. The Brent benchmark’s global price dropped by almost 4 per cent and the price went under US$55 per barrel. Iran’s storage of crude oil has reached as much as 20 million barrels which is greater than what the U.S. consumes in one day. They could release the oil storage as they desire.
Since Iran’s economy is highly dependent on oil sales, the oil sanctions lift was one of the country’s top objectives. The sanctions had caused many cancellations and delays in the production and exploration of oil in the recent past.
Energy expert Michael Levi said that the framework agreement puts firth a road that can substantially boost the oil exports of Iran in due time.