Iranian oil production fell from an average of 3.7 million barrels per day in 2010 to 2.7 million barrels per day in 2013. Whilst, Saudi Arabia, increased production in order to fill for other OPEC member states such as Libya and Iran in 2013, as they compensated for the void created through aggressively increasing production to the point of excess. Now, world oil supply is soaring at around 97million barrels a day produced for record-low prices at $27 per barrel.
The nuclear deal involving Iran and other world powers were to limit its sensitive nuclear activities mainly to prevent creation of nuclear weapons and warfare for more than a decade. The US believe these talks will help their cause in the West and strengthen relations between the coinciding nations by stopping Iran from obtaining a nuclear weapon. In return, previous crippling sanctions are lifted and allowed for Iran to trade and sell oil on the international market again through use of the global financial system.
The sanctions has created estimated losses of $160billion dollars upwards and especially with the worlds 4th largest oil reserves, Iran look to export oil for cheaper prices for quick revenue. On a side note, now armed with the rights to nuclear power, Iran stresses that their nuclear programme is for peaceful purposes only such as the trade of oil. After the international nuclear sanctions were lifted in January 2016, Iranian crude oil shot to the forefront of the economy and unfroze over $100billion dollars in assets.
With the large stockpiles occupied In Kharg Island and the large early accessible oil fields found in the country, Iran begun to drastically match supplies from Saudi Arabia, Iraq and Russia by quickly dispatching its super tankers to European and Asian refineries. Coupled, with the unfrozen ‘assets’ in form of oil this has forced increased supply into the market. As a result, this drives down world bench markers for oil price and is reflected as the Brent and West Texas International (WTI) dropped to their lowest levels since 2003. The WTI fell to under $27 a barrel which signifies a 6.7% fall; recording one of the biggest falls since 2003.
Consequently, this creates a problem of oversupply with the world producing over 96.3 million barrels a day where the daily consumption is only at 94.5million barrels. Not only does this increase the volatility of the market, this has also generated great speculation. Furthermore, in resolving such issues, an excess of 1.8 million barrels are being transferred back into storage tanks where they were already filled to the brim. Although new storage is built every day, the capacity is too much as overflow and spillage are commonly seen. The wasted resources also insinuate worse environmental conditions for local area and has further implications on surrounding wildlife.
Other solutions include holding tanks where many spare barrels are held in tankers sitting in the sea off Kharg. This is a short-term remedy as OPEC look for demand of oil to recover quickly as their Hail Mary out the situation.
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