Iran has once again refused to freeze oil production – in fact, the Islamic Republic insists it will continue to increase output. Along with a pause in oil rig reductions, this caused oil prices to slide again on Monday.
“Oil fell $1 a barrel or more in early trade, the day after the Mehr news reported that Iran’s Deputy Oil Minister Rokneddin Javadi said the country’s crude exports, excluding gas condensates, would reach 2.2 million barrels per day (bpd) by the middle of summer from 2 million bpd now,” Reuters reports.
Furthermore, a new industry report “showed the number of oil rigs operated by U.S. drillers held steady for the first time this year, following a near two-year slump in the count.”
Only a stockpile drawdown, and problems associated with the wildfires in Canada, kept prices from dipping even further. In the long term, reduced production from collapsing Venezuela and chaotic Libya have been keeping prices up, which raises the question of what will happen to the oil market if either or both of those countries is restored to order and full productivity.
Bloomberg News reports Iranian officials saying they will not consider an output freeze until their oil output has returned to pre-sanctions levels.
“Stagnating rig counts and comments from Iranian officials show that the way up for the oil prices may come to an end now,” said oil analyst Frank Klumpp of Landesbank Baden-Wuerttemberg, as quoted by Business Standard. This, in turn, would appear to dash hopes that OPEC would implement a production freeze to bring prices up.
Business Standard also cites a Goldman Sachs prediction that shale productivity will increase through 2020, “which will push average breakevens for shale plays below $50 per barrel for U.S. crude.”