Home' Trinidad and Tobago Guardian : July 16th 2015 Contents BG8 ENERGY
BUSINESS GUARDIAN www.guardian.co.tt JULY 16. 2015
The nuclear deal reached between six world powers,
led by the United States, and Iran can pose significant
challenges for the next government as it is likely to
lead to further downward pressure on oil prices.
This is the prediction from the administrator of the
US Information Agency Adam Sieminski who noted
a deal would lead to the lifting of sanctions on Iran and allow the
Islamic country to sell another one million barrels of oil per day
into an already oversupplied market.
Speaking recently at Columbia University, Sieminski identified
a deal with Iran as one of the reasons that the EIA feels can sig-
nificantly impact crude prices.
In fact, upon announcement of the deal
crude on Tuesday, prices immediately started
falling. Crude prices fell by as much as 2.3
per cent to US$50.98 a barrel as investors
reacted to the freshly inked deal. Experts
have warned that the deal could lead to a flood of new oil from
Iran; the country has 30 millions of barrels of crude in storage and
ready for sale.
It is estimated that the T&T government could lose as much as
$7 billion in revenues because of lower oil and gas prices. In the
last year crude prices have lost 45 per cent of their value, falling
from over US$110 for a barrel of oil to under US$60 a barrel as of
In his lecture, Sieminski blamed four reasons for the fall in crude
prices. He said it had to do with the slowdown of the Chinese econ-
omy, the quick recovery of Libya s oil production which added a
million barrels of oil to the world s daily production, additional
growth in non-OPEC production and Saudi Arabia s refusal to cut
The administrator of the Energy information Agency said that,
apart from the Iranian deal, there were other downside risks to oil
prices including if the world economic growth is slower than
projected; for example if China s economic growth slows significantly
and if Saudi Arabia keeps production at 9.6/9.7 million barrels in
He said prices would only strengthen if oil demand growth
surprises and is higher than projected. If key OPEC producers cut
production more than expected, if Iraq production is significantly
disrupted by ISIS or if there is social unrest in oil dependent countries
that lead to supply disruptions.
In its latest report the EIA noted that North Sea Brent crude oil
prices averaged $61/barrel (b) in June, a $3/b decrease from May.
It added that crude oil prices fell by about $4/b on July 6 in the
aftermath of the "no" vote in Greece on the economic programme,
as well as lingering concerns about lower economic growth in China,
higher oil exports from Iran, and continuing
growth in global petroleum and other liquids
"A per cent price change of this extent on
a single day is unusual, but despite daily price
volatility, monthly Brent crude oil prices have averaged between
US$55/b and US$65/b per month since falling to US$48/b in Jan-
The EIA therefore forecasted that Brent crude oil prices will
average US$60/b in 2015 and US$67/b in 2016. Forecast West Texas
Intermediate (WTI) crude oil prices in both 2015 and 2016 average
US$5/b less than the Brent price. The current values of futures and
options contracts for December 2015 delivery suggest the market
expects WTI prices in December 2015 to range from US$41/b to
In the case of natural gas this prices are expected to remain weak
at the Henry Hub. It said, "Although injections have been strong
most weeks, hot temperatures and high demand from the electric
power sector contributed to lower-than-average injections during
late June. Nevertheless, working inventories are on pace to end the
injection season above the previous five-year average. EIA projects
end-of-October stocks will be 3,919 Bcf, 121 Bcf (3.2 per cent) more
than the five-year average."
The oil market should be more balanced
next year as China and the developing
world use more oil while supply of
fuel from North American shale grows
more slowly, OPEC said on Monday.
In its monthly report, the 12-member Organisation
of the Petroleum Exporting Countries said it expected
world oil demand to increase by 1.34 million barrels
per day (bpd) in 2016, up from growth of 1.28 million
bpd this year.
World oil demand growth should outpace any
increase in oil supply from non-OPEC sources and
ultra-light oils such as condensate, increasing con-
sumption of OPEC crude, it said.
"This would imply an improvement towards a
more balanced market," OPEC s in-house economists
said in the report.
OPEC has increased production sharply over the
last year as its most powerful member, Saudi Arabia,
and other core producers in the Middle East Gulf
attempt to build market share, leading to higher
OPEC said Saudi Arabia reported that it pumped
10.56 million bpd last month, up 231,000 bpd from
May. According to industry data, that would be a
Higher OPEC production has been a major factor
behind a collapse in oil prices, which are now around
half their levels of a year ago.
Benchmark Brent crude traded around US$58.70
a barrel on Monday, down from a peak above US$115
in June 2014.
Lower prices have squeezed high-cost oil producers
and brought a sharp fall in the number of oil explo-
ration rigs in operation, particularly across North
OPEC said supply of oil from non-OPEC producers
was expected to grow by only 300,000 bpd in 2016,
down sharply from growth of 860,000 bpd this year.
US oil output, which has seen rapid increases over
the last five years thanks to the development of huge
shale resources by "fracking", is expected to log much
more modest supply growth in 2016.
"Total US liquids production is expected to grow
by 330,000 bpd, just one third of the growth of
930,000 bpd expected this year," it said.
That should mean more demand for OPEC oil next
OPEC said it expected demand for its own crude
to rise by 860,000 bpd in 2016 to 30.07 million bpd.
But it cut its estimate of demand for its crude this
year by 100,000 bpd to 29.21 million bpd.
The group said it estimated, based on figures from
secondary sources, that its own collective crude
output rose by 283,000 bpd to 31.38 million bpd in
June, led by Iraq, Saudi Arabia and Nigeria.
That is still well ahead of current demand for OPEC
oil and should help ensure global inventories continue
to build for some time to come.
OPEC sees more
market in 2016
OPEC said supply of oil
producers was expected
to grow by only 300,000
bpd in 2016, down
sharply from growth of
860,000 bpd this year.
on global oil prices
Fall-out of nuclear deal between
Iran and world powers:
In this December 22, 2014 file photo, an Iranian oil worker rides his bicycle at the Tehran's oil refinery south of the capital Tehran, Iran. Oil
prices that slumped steeply earlier this year may take another hit once a historic deal between the West and Iran allows that country to
start pouring more crude into a market already brimming with supply. (AP)
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