Oil Prices Rise as Market Ponders Scale of Future Iran Exports
Iran hopes to ramp up oil exports following the expected removal of sanctions against it.
Oil prices rose on Monday after a breakdown in diplomatic ties between Saudi Arabia and Iran, which some speculated could result in supply restrictions.
Saudi Arabia, the world’s biggest oil exporter, cut diplomatic ties with Iran on Sunday in response to the storming of its embassy in Tehran, following Riyadh’s execution of a prominent Shiite cleric on Saturday. Fellow Gulf producer Bahrain said on Monday it too would cut ties with Iran.
Benchmark Brent crude futures, were last up 72 cents on the day at $38.00 a barrel at 1323 GMT, closed at a session high at $38.50.
The clash between the two Middle Eastern countries comes as Iran, which holds some of the largest proven reserves, hopes to ramp up oil exports following the expected removal of sanctions against it.
Iran plans to raise output by half a million to 1 million barrels per day (bpd) post lifting of sanctions, although Iranian officials said they did not plan to flood the market with its crude if there was no demand for it.
Jasper Lawler, Market Analyst, CMC
Iran may decide to take more of a hard-line stance against the Saudi-oriented policy of not cutting production. So far, they’ve been going along with it, but this renewed political vigour may prompt them to change a bit.
Oil prices are still down by two-thirds since mid-2014 on oversupply as producers including the Organization of the Petroleum Exporting Countries (OPEC), Russia and the United States pump between 0.5 million and 2 million barrels of oil every day in excess of demand.
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