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Energy Insights: Energy News: Iran deal may cut EIA oil price forecast by as much as $15/bbl

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Iran deal may cut EIA oil price forecast by as much as $15/bbl




WASHINGTON (Bloomberg) -- A final nuclear deal with Iran and the lifting of oil export sanctions from the OPEC member could lead the U.S. Energy Information Administration to lower its oil price forecast for next year by as much as $15/bbl.

Iran and world powers reached a preliminary agreement on April 2 that set the parameters for further negotiations needed to complete a signed, comprehensive agreement by a June 30 deadline. The re-entry of more Iranian barrels could cut the EIA’s price projection by $5/bbl to $15/bbll, the U.S. Energy Department’s statistical arm said in its monthly Short-Term Energy Outlook (STEO) report Tuesday.

“If a comprehensive agreement that results in the lifting of Iranian oil-related sanctions is reached, then this could significantly change the STEO forecast for oil supply, demand, and prices,” the EIA said in the report. “However, the timing and order that sanctions could be suspended is uncertain.”

Iran’s full return to the oil market risks delaying a recovery in prices, which have slumped 50% since last year following a supply glut. Iran could boost output by at least 700,000 bopd by the end of 2016, the EIA said. The nation produced 2.85 MMbopd in March, according to Bloomberg data.

The EIA said in the report that West Texas Intermediate crude, the U.S. benchmark, will average $70/bbl next year and Brent will be at $75.03. The forecasts don’t take additional Iranian supply into consideration.

Iran Storage

The additional output from Iran could lead to an annual average growth of about 500,000 bopd in global inventories in 2016, stressing storage capacity and pressuring prices, the EIA said. The agency projected that global stockpiles will grow by 100,000 bopd in 2016, without considering additional supplies from Iran.

Iran holds at least 30 MMbbl in storage and could move oil out of storage more quickly during the second half of 2015 “in preparation to increase production if discussions on sanctions show progress,” the EIA said.

“As a result, the global market may see incremental increases in Iran’s crude oil exports before seeing a substantial increase to Iran’s production,” the agency said.

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