Iran is beginning efforts to boost oil production and exports amid a global supply glut after the removal of sanctions that shackled its economy and capped crude sales.
The Persian Gulf country is targeting an immediate increase in shipments of 500,000 barrels a day, Amir Hossein Zamaninia, deputy oil minister for commerce and international affairs, said Sunday in an interview in Tehran. Iran plans to add another half million barrels within months. The additional sales will push crude prices lower as markets are already oversupplied, said Robin Mills of Dubai-based oil consultant Qamar Energy.
"The oil ministry, by ordering companies to boost production and oil terminals to be ready, kicked off today the plan to increase Iran's crude exports by 500,000 barrels," the official Islamic Republic News Agency reported. Zamaninia said the plan is "still valid" and will be done in a "managed way to minimise the negative impact" on prices.
Buyers of Iranian crude are free to import as much of the country's oil as they want after the International Atomic Energy Agency determined that the country had curbed its ability to develop an atomic weapon. As holder of the world's fourth-largest reserves of crude and biggest deposits of natural gas, Iran gains immediate access to about $50 billion in frozen accounts overseas, funds the government says it will use to rebuild industries. It also opens the door to foreign investors such as Total SA and Eni SpA.
Volumes 'uncertain'
Once the second-biggest producer in the Organization of Petroleum Exporting Countries, Iran is now the fifth-biggest in the 13-member group. The country's oil exports fell to an average of 1.4 million barrels a day in 2014 from 2.6 million barrels daily in 2011, the year before the US and European Union intensified sanctions, the US Energy Information Administration said in June.
"There's still the cloud of uncertainty around how much Iranian crude will come to market and when," said Mills, Qamar Energy's chief executive officer. The global price impact of more Iranian barrels will depend on how aggressive the country is in offering discounts and how quickly it ramps up sales, he said.
Mills expects Iran can raise output by 600,000 a barrels a day over the next six months and add as much as 800,000 barrels of daily output this year.
