The U.S. influence on the Middle East seems to be fading of late, Josephine Mills, a Senior Associate at Enverus Intelligence Research (EIR), told Rigzone.
“U.S. sanctions on Iran had greatly impacted reported volumes in 2018-20, but such volumes appear to have been brought back online,” Mills said.
“As for the global oil and gas industry impact, fading U.S. influence in the Middle East coupled with half-full U.S. SPR levels implies more oil price volatility to come,” Mills added.
Caleb Jasso, an analyst at the Institute for Energy Research (IER), told Rigzone that the current sanctions on Iran are meant to prevent Iranian oil from entering the global market.
“However, the Biden administration has not enforced these sanctions which has allowed for Iran to have earned $88 billion since February 2021 from their primary customer, China,” he said.
“If the Iran Nuclear deal had been revived, Iran would have been reinstated as a full member of OPEC and would have contributed to the overall amount of oil available in the global market,” he added.
“However, even without the deal being revived, not much will change with global markets given the status quo of Iran selling their oil, primarily to the Chinese, without any serious enforcement of sanctions,” Jasso went on to state.
SPR Levels, Iran Production
Weekly U.S. ending stocks of crude oil in the SPR came in at 364.88 million barrels on April 12, according to data on the U.S. Energy Information Administration (EIA) website, which was last updated on April 17.
The highest figure in the EIA data, which showed weekly numbers from August 1982 to April 2024, came on January 1, 2010, at 726.617 million barrels. The lowest figure in the data came on August 20, 1982, at 270.455 million barrels. According to the EIA figures, weekly U.S. ending stocks of crude oil in the SPR dropped from near 640 million barrels in January 2021 to under 350 million barrels in June 2023, before rising back up to over 360 million barrels back in March.
A White House fact sheet released on March 31, 2022, which highlighted that gas prices had increased by nearly a dollar per gallon, outlined that Biden would announce the largest release of oil reserves in history, putting one million additional barrels on the market per day on average, every day, for the next six months.
“The scale of this release is unprecedented. The world has never had a release of oil reserves at this one million per day rate for this length of time,” the fact sheet stated.
In its latest short term energy outlook (STEO), which was released earlier this month, the EIA highlighted that Iranian crude oil production averaged 3.23 million barrels per day in the first quarter of this year and 2.87 million barrels per day overall in 2023.
Iran was the fifth-largest crude oil producer in OPEC in 2021 and the third-largest natural gas producer in the world in 2020, the EIA noted in an Iran country analysis executive summary on its site last updated in November 2022.
“It holds some of the world’s largest deposits of proved oil and natural gas reserves, ranking as the world’s third-largest oil and second-largest natural gas reserve holder in 2021,” the summary adds.
“Despite its abundant reserves, Iran’s crude oil production has fallen since 2017 because the oil sector has been subject to underinvestment and international sanctions for several years,” it continues.
Geopolitical Risk and Oil Price
Frederick J. Lawrence, the ex-Independent Petroleum Association of America (IPAA) Chief Economist, told Rigzone that, in addition to the usual supply and demand fundamentals, “dual war geopolitical risk has played an extra-large role in the direction of oil prices over the past two years”.
“The Russian invasion of Ukraine has been joined by the war in Israel and joined by increased maritime risk in the Red Sea and Gulf of Aden region,” he added, noting that these factors recently pushed Brent crude “over the key $90 per barrel threshold”.
“The continuation of OPEC+ cuts and expectations of record demand again in 2024 mean that oil markets will remain tight leading up to the U.S. elections in November,” he said.
“Already, fears of higher gasoline prices are entering the political fray, a critical economic measure, especially given the persistence of hot inflation readings in the U.S.,” Lawrence noted.
“Continued global geopolitical risk will remain a pressure point for petroleum product prices everywhere, especially given the fact that the world continues to reach higher petroleum demand for the past few years,” he continued.
To contact the author, email andreas.exarheas@rigzone.com
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