Oil prices continue fallingNews // January 19, 2016
Oil prices are still falling, with Brent falling to US$27.67, its lowest level since November 2003. At US$28.36 per barrel, WTI reached its lowest level since October 2003. The renewed price slide was triggered by the lifting of sanctions against Iran at the weekend.
As Commerzbank Reseearch noted, Iran is now able once again to export unlimited quantities of oil and gas. The additional supply from Iran could not have come at a worse time given that the market is already oversupplied, so the oversupply will be further increased.
"The prospect of additional oil from Iran is likely to preclude any price recovery for the foreseeable future, yet should no longer weigh so heavily on prices given that a 500,000 barrel per day increase in Iranian oil shipments – which we believe to be realistic – should already be priced in," said Commerzbank.
"It is unlikely that the production volume will be increased significantly more sharply this year. After all, Iraq and Libya took roughly 12 months to regain their original production levels following the wars in 2003 and 2011 respectively (in the case of Libya, this also lasted only a short time). Because Iran was unable to invest in its oil infrastructure for several years due to the sanctions and now has to make up for this, it is likely to take more rather than less time for oil production to normalize."