4 Jan

Civil Unrest in Iran Could Impact Crude Oil Prices

WRITTEN BY Gordon Kristopher FEATURED IN Commodities

Civil unrest in Iran 

On January 3, 2018, public protests continued for the sixth consecutive day in Iran. The protests against the government are due to weak economic conditions. It pushed US crude oil (UCO) (UWT) prices to three-year highs on January 3, 2018. Higher oil prices favor the Energy Select Sector SPDR ETF (XLE), which rose 1.5% to 74.5 on January 3, 2018.

More than 20 people have died due to the protests in Iran. The protests restarted geopolitical risks, which could impact crude oil supplies. So far, there haven’t been any supply disruptions. However, supply disruptions could boost crude oil (BNO) (USO) prices.

Civil Unrest in Iran Could Impact Crude Oil Prices

Iran’s crude oil production

Iran’s crude oil production hit 3,840,000 bpd in November 2017. The production increased by 140,000 bpd or 3.7% year-over-year. Iran’s oil production was near a nine-year high. The production increased after the US lifted sanctions on Iran in January 2016.

Any rise in Iran’s crude oil production is bearish for oil prices. Lower oil (USL) prices have a negative impact on energy companies (IXC) (IYE) like Oasis Petroleum (OAS), Bill Barrett (BBG), and Northern Oil and Gas (NOG).

Iran and the output cut deal 

Iran supported the extension of ongoing output cuts until December 2018. Iran is allowed to cap production at ~3,800,000 bpd.

Iran’s crude oil production plans  

Iran’s oil production averaged 3.5 MMbpd (million barrels per day) in 2016. The production is expected to average 3.8 MMbpd in 2017. Iran plans to ramp up its oil production to 4.7 MMbpd by 2021. Any increase in production could pressure oil (UCO) prices. However, geopolitical tensions or a supply outage could support oil (SCO) prices.

Next, we’ll discuss how Russia’s oil supply impacts oil prices.

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