The International Monetary Fund suggests in a report this week that oil prices have further to fall. In an analysis on Iran, the agency put an estimated dollar figure on the impact of the country re-entering the oil market early next year.
$20/bbl – $30/bbl Oil Seen On Iran’s Return
The Islamic Republic is expected to add an additional 500,000 – 1M/bpd of oil to a market already oversupplied by up to 2 M/bpd. This could prompt prices to fall to between $30 and $20/bbl from current prices, which are hovering around $35 – $36/bbl, the agency said.
Here’s what the agency said:
“The expected increase in oil supply from Iran would put downward pressure on global prices, by an estimated $5–$15 per barrel, boosting global GDP by an estimated 0.3 percentage point. While part of this impact may be already discounted in futures markets, a further decline could materialise when Iran’s exports rise, depending on how other OPEC producers react. The potential for Iran to increase its non-oil trade is also large, with estimates from a gravity model suggesting that Iran’s exports, at about 20 percent of GDP, are less than half of their potential.”
Iranian Oil Minister Bijan Zanganeh
End Of Sanctions To “Dramatically” Improve Iranian Economy
The IMF said that depressed oil prices and delayed investment decisions have slowed Iran’s economic growth. Real growth in GDP is forecast by the agency to fall from 3% to between 0.5% and -0.5% in 2016.
The IMF said that though oil prices were affecting the Iranian economy, the rescinding of Western sanctions early next year should dramatically improve the country’s situation.
“However, Iran faces multiple constraints to unleash its growth potential and to achieve single-digit inflation sustainably,” the IMF said.
By the end of 2016, Iran is expected to ramp up dozens of O&G projects, valued at an estimated $185 billion. The agency noted that output from Iran is increasing, holding steady at about 2.85 M/bpd from an average of 2.67 M/bpd in 2013.