Last week, Iran announced through Deputy Oil Minister Amir Hossein Zamaninia that oil production in the country might hit around four million barrels a day before the year ends. The Islamic republic has reportedly increased its production in the past couple of months by 3.8 million barrels per day following years of international sanctions. Iran is known to have been raising its production to make up for the market share it lost over the past years.
Along with Libya and Nigeria, Tehran has also been exempted from the agreement between the Organization of the Petroleum Exporting Countries and a number of non-OPEC producers to cut oil production in their efforts to curb global overproduction and help drive oil prices up. Despite these extensive efforts including extending the cut until next year, the continuous rise in US oil production has kept oil prices low in the past couple of months.
Oil prices have started to recover last week after reports of a decline in the U.S. crude oil futures output.
In light of the second anniversary of the Iranian nuclear deal, the current Trump administration is expected to come up with new sanctions that will address Iran’s ballistic missile program. These possible new sanctions are expected to drive oil prices.
The sanctions may also halt or affect Iran’s oil production and might prevent them from continuously raising production. While this might be good for the crude market at the moment, the primary function of the sanctions will overall counter Iran’s growing military activities all over the Middle East. Forces from Iran have reportedly been directly sending attacks to U.S forces in the past weeks.
The White House is expected to make an update or announcement on Tuesday regarding the other country’s compliance with agreements with the deal.
Crude-oil prices are currently stable due to reports of a higher crude oil demand in China and a slight decline in the reports of the U.S. EIA production. According to the OECD, oil inventories have declined by 6 million barrels in May but remains above its five year average of 266 million barrels.
The U.S. light crude oil hovered at around $45.92, ten cents lower from the previous session as well as the Benchmark Brent crude at $48.32 per barrel. Oil prices have jumped by as much as 5% during the past week on signs of a recovering market due to a higher demand in China. The price of crude oil is expected to rise after a significant sanction has been imposed on Iran by the Trump administration.