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THE news about the upcoming agreement to be reached between US and Iran concerning the nuclear deal raises big questions as to how to handle Iran’s oil volumes. Iran has about 50 million to 75 million barrels of oil in the offshore tanks in various parts of the world. Besides its current oil production of 2.6 million per day, it has the potential for supplying gas. This makes Iran very attractive to Europe, which is desperate for energy.
The challenge is how to deal with the new situation. Will the organization pump less oil to cater for the new arrival? This might annoy other oil consumers, which will push the oil price higher at a desperate time. On the other hand, OPEC+ must also address its other partner Russia as soon as the full boycott is imposed.
Oil prices today are at an acceptable level within the range of $100 per barrel. Will it remain at this level, or will it weaken? Any disruptions to the oil supply will cause panic in the oil market or increase the oil demand. This will put OPEC+ under pressure to release more oils. The oil cartel is in a tight supply situation as its members cannot meet its own quota volume. Any decrease in the oil prices will certainly lead to tighter oil supply.
OPEC+ plus is calling for firm oil prices to invest more in oil and justify its investments. However, oil companies are reluctant to invest more in fossil fuels, which is in complete contradiction to the OPEC+ policy.
Here is where the disagreement lies between the oil organization and the USA energy policy, which is pushing for more oil to satisfy the USA motor gasoline voters. There is a big gap of disagreement which could eventually lead to minimum investment, less oil and higher oil prices. OPEC+ is stating that international oil companies must invest along with us in oil, or we will keep our investments to the minimum.
The current level of oil is comfortable for all of us. However, any level below the current $100 per barrel certainly will be annoying to OPEC+, and the world must be worried. The current war and invasion of Ukraine will add another dimension to the oil situation, with added emphasis on the position of OPEC+ members.
Iran is a new challenge, which should not lead to lower oil prices. It will give OPEC+ a new line of thinking to balance between Russian and Iranian volumes. This will force big oil OPEC producers to lower their production levels.
By Kamel Al-Harami
Independent Oil Analyst