HOUSTON – Iranian officials say the country will hike its oil exports by nearly a quarter in the first few months of the Persian New Year, which began Sunday. Contrary to conventional market thinking, Genscape says there’s no reason yet to think Iran is exaggerating.
Genscape’s assessment comes a few weeks after data from OPEC and the International Energy Agency showed Iran produced an additional 250,000 to 310,000 barrels a day in January and February, underwhelming oil markets that had expected about twice that amount.
Genscape, which tracks the movements of oil vessels, estimates Iran’s oil exports climbed by 480,000 barrels a day in those two months, in line with Iran’s forecast that it could boost overseas sales by half a million barrels quickly after western powers lifted oil-export sanctions, which were removed in mid-January.
Based on that early surge and the months Iran has used to prepare for its new year export increase, it’s not impossible for Iran to boost overseas sales by another 400,000 barrels a day in the next few months, said Amir Bornaee, a Genscape analyst.
“I know people are quite skeptical about what officials say, but what I’m actually seeing is different than the market’s impression,” Bornaee said. “Iran has all the infrastructure it needs. I don’t see anything that’s a barrier for them, except the market.”
Last week, Iran First Vice President Eshaq Jahangiri said the country would increase exports to 2 million barrels a day after its next calendar year began March 20, according to Iran’s news agency Shana. It’s currently exporting about 1.58 million barrels a day, Genscape says.
The IEA and others are skeptical Iran will boost production by 1 million barrels a day this year. It will probably only reach an increase of 600,000 barrels a day this year, the IEA says.
“That may not necessarily reflect any difficulties with their output,” said Neil Atkinson, head of the oil market division at IEA. “Marketing extra crude or condensate is easier said than done in a glutted market, especially in a market where the return of Iran was fairly widely anticipated. It didn’t come like a bolt from the blue.”
The debate over whether Iran can meet its goals is important because the oil is coming back into the market at a critical time when U.S. oil production is declining and large producing nations are counting on that to realign supply and demand. So far, Iran’s oil production hasn’t changed the IEA’s mind about the market realigning in early 2017, Atkinson said.
Prior to strict economic sanctions in 2012, Iran had carved out a big chunk of the European oil market. But in Iran’s absence, Saudi Arabia, Russia and Iraq built inroads. The rivalry could be a major factor in how quickly Iran can sell its crude exports in the region.
“Now the Iranian’s would like their European market back, thank you very much, but the others aren’t just going to stand aside,” Atkinson said. “They have to compete.”
The major differences between estimates by Genscape, the IEA and OPEC were in January. The IEA estimates Iran boosted exports by 90,000 barrels a day in January, while OPEC pegs the increase that month at 67,000 barrels a day.
Genscape says Iran bolstered its exports by 260,000 barrels a day in January, a bigger estimate than the other two groups’ measure of production, likely because Iran sold much of the crude it had stored on vessels for years.
The February estimates were much more closely aligned, which suggests Iran’s oil production is catching up to its rate at which it was able to sell its oil overseas.
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