jeudi 2 avril 2015
Oil didn't fall off a cliff after 'tentative' Iran nuclear deal
Posted on 13:51 by nice news
The effects have devastated Iran's economy. Youth unemployment has spiked above 20%, and inflation has soared.
The issue: The problem with Iran exporting more oil is that the world already has too much oil. Prices have crashed from over $100 a barrel last summer to below $50. The price hit the lowest level in six years. Adding Iran into the mix is expected to send prices lower. That's bad news for Iran, which requires oil prices above $130 a barrel to balance its budget, according to Deutsche Bank. While there was mention Thursday of "sanctions relief" once Iran complies with the terms of a deal, much more must still be worked out between Iran, the U.S. and the other "P5 +1" partners.
That may explain why the oil price did not react much. For weeks, experts predicted oil would likely slide as much as $5 after the announcement of a deal. Instead, oil is down less than a dollar, and the U.S. stock market showed little reaction.
"Our work is not done. The deal is not yet signed," President Obama said Thursday. "Many key details will be finalized in the next three months."
Read more about the Iran deal
Energy traders are now in "wait and see" mode.
"Assuming they get agreement by June 30, it will take months after that until weapons inspectors in there. You might not see that oil hit the market for over a year," said Phil Flynn, a senior energy analyst at Price Futures Group.
"They are in a Catch-22. The more they start exporting, the more the price of oil is going to go down," said Brenda Shaffer, a visiting researcher at Georgetown University.
Related: Is $30 a barrel next for oil?
Lots of Iranian 'cheating': There are currently 12 sanctions in place that target Iran's energy sector, including on the purchase of Iranian crude oil, Barclays said. That is supposed to prevent oil exports from Iran.
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The issue: The problem with Iran exporting more oil is that the world already has too much oil. Prices have crashed from over $100 a barrel last summer to below $50. The price hit the lowest level in six years. Adding Iran into the mix is expected to send prices lower. That's bad news for Iran, which requires oil prices above $130 a barrel to balance its budget, according to Deutsche Bank. While there was mention Thursday of "sanctions relief" once Iran complies with the terms of a deal, much more must still be worked out between Iran, the U.S. and the other "P5 +1" partners.
That may explain why the oil price did not react much. For weeks, experts predicted oil would likely slide as much as $5 after the announcement of a deal. Instead, oil is down less than a dollar, and the U.S. stock market showed little reaction.
"Our work is not done. The deal is not yet signed," President Obama said Thursday. "Many key details will be finalized in the next three months."
Read more about the Iran deal
Energy traders are now in "wait and see" mode.
"Assuming they get agreement by June 30, it will take months after that until weapons inspectors in there. You might not see that oil hit the market for over a year," said Phil Flynn, a senior energy analyst at Price Futures Group.
"They are in a Catch-22. The more they start exporting, the more the price of oil is going to go down," said Brenda Shaffer, a visiting researcher at Georgetown University.
Related: Is $30 a barrel next for oil?
Lots of Iranian 'cheating': There are currently 12 sanctions in place that target Iran's energy sector, including on the purchase of Iranian crude oil, Barclays said. That is supposed to prevent oil exports from Iran.
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Oil didn't fall off a cliff after 'tentative' Iran nuclear deal
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