Summary: The lifting of Iran’s sanctions is a important step towards a better world. But what does it mean for the oil price going forward? Additionally, a US production decline could be laying the ground for a recovery in the oil price.
The lifting of Iran’s sanctions is a important step towards a better world.
For the people of Iran but also for the rest of the world. Economically, Iran will benefit.
The big question pundits, economists, forecasters and investors are asking what does it mean for the oil price going forward?
Iran says it will be able to hike sales by 500,000 barrels the day and increase their total exports to approximately 2.5 million barrels within the next year.
This hike is great news for most of us because the oil price could go much lower than it is already. It is devastating news for people working and investing in the oil industry. Because more job cuts can be expected. In November 2015, industry consultant Graves & Co. already mentioned that the number of jobs gutted from oil and gas companies around the world passed the 250,000 mark.
Investors are afraid that Iran’s full return to the war could provoke a price war with Saudi Arabia and other Middle East countries because Iran plans to offer discounts to win back customers.
Investors have felt the pain many energy companies and MLPs in the energy and gas sector have collapsed in price. With oil prices stalling at $35/barrel oil, the majority of energy companies operate cash flow negative and are therefore burning through cash and other forms of liquidity such as bank revolvers and term loans.
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