Early March saw the first delivery of Iran oil to Europe after the lifting of the sanctions. This means that the Russian plan to effect a price adjustment in the oil market by getting the majority of oil exporting nations to agree to put a cap on oil production at this January’s level has effectively fallen through. However, is Iran’s decision not to limit its own production that much of a big deal for the market?
There is going to be a price adjustment in the oil market but nobody knows when it is going to happen
The Kommersant newspaper writes that in the near future Iran can hardly be regarded as a player that can have a significant impact on oil prices. Especially if you take into account the consensus of some economists that the situation in the oil market is moving towards a new price equilibrium. This is going to be happening primarily through the natural process - by cutting back on investments in production. “We are already seeing that just about 650 derricks are operating on US shale deposits as opposed to 2,000 that were in operation before. This means that a price adjustment in the market is inevitable. The thing is nobody knows when it is going to happen and what the new price is going to be,” Leonid Grigoriev, advisor to the Head of the Analytical Center, told the Kommersant.