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Could oil market upside be running out of steam?

Iran's oil ministry issued a statement that most of Iran's oil production, if the oil embargo is lifted, could be restored within just a month. And within 3-4 months Iran could lift oil output to the 2018 level, i.e. to 4.5 mpbd, up from the current 2 mpbd.

The ministries of OPEC+ countries have not yet reacted to this statement from Iran, which is an OPEC member. Earlier, the Saudi Energy Minister Abdulaziz bin Salman urged the alliance not to overestimate the possible increase in Iranian oil production. Also, Russian Energy Minister Alexander Novak did not rule out a slight increase in Iran’s oil production this summer, which, in his opinion, should not exert a strong impact on oil prices. US inventory data still do not show that there is currently a supply overhang on the market. According to yesterday’s EIA weekly petroleum status report, crude oil stockpiles showed a drawdown of 5.24 mln bbl, overshooting analyst estimates that called for a draw of slightly over 2 mln bbl.

However, Bloomberg’s recent reports that a large number of unloaded tankers carrying several million barrels of oil are still floating in the North Sea could send a strong bearish signal for crude futures, since such a situation could mean that in Europe, unlike the US, oil demand has not yet recovered. Overall, the oil market environment amid sluggish demand in Europe and a possible ramp-up in oil supply by Iran remains tense, while the price of Brent is apparently not ready to move any higher and could remain rangebound at $ 69-72/bbl.

 

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