Iran trade sanctions increasing oil demand elsewhere

Despite assurances from the Ministry of Petroleum in Iran, recent trade sanctions imposed on Iran have severely reduced their crude oil exports. Usually the third largest exporter of crude oil, the short term decline in exports is currently approximately 40%, bringing exports down to just a bit over 2 million barrels a day.

Oil Minister Rostam Ghasemi insists that the drops in production will not affect Iran’s position in the global marketplace. The country, who at once trailed only Saudi Arabia as one of the world’s top oil producers now falls to tenth, almost losing it’s position in the top ten entirely.

The loss in global production is expected to be made up elsewhere. In the short term, increase in oil exports from the United States, Canada, Russia, and Australia seem to be leading the pack, while Saudi Arabia continues leading the world in overall crude oil production.

With diplomatic tensions between the western world in Iran, trade sanctions are expected to continue (or increase in severity) and with good prospects for oil demand worldwide, the production will continue to be made up elsewhere. In fact, destabilization of relations between Iran and Saudi Arabia may see Iran’s production worsen in the short term.

Initial reports of shale oil production show that the United States may increase from their current position producing 7.6 million barrels of oil per day to nearly 9 million per day by 2018. If these expectations are met, the country may be able to meet it’s own demands without importing a single barrel.

Some analysts predict increased crude oil production may cause oil prices to drop which may cause minor problems for some oil producing companies, but the only vocal opposition to increased demand is currently coming from Venezuela and some African countries. As well, of course, from Iran. Due to the current trade sanctions, Iran needs prices to exceed $100 per barrel to meet the Iranian Ministry of Petroleum’s targets for export profits.

Meanwhile, most American analysts predict prices to remain stable around $115 per barrel. Asia is currently importing nearly half of it’s overall oil and gas production keeping worldwide demand high.

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