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Iran's Role in Saudi Arabia's Cheap Oil Strategy

12/3/2015

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As oil prices hover around $40/Bbl, Saudi Arabia continues to pump oil at record levels hurting other OPEC members (such as Venezuela, Algeria, etc.). Iran in particular is looking for Saudi to cut production as it plans to re-enter global oil markets after years of sanctions. With U.S. sanctions on Iran possibly ending as soon as January, Iran is threatening to deepen the oil glut with new output. Notably, Iran has nearly 60 billion barrels of proven oil in its soutwest region alone, and is hoping to ramp-up production by 1.5 million barrels by the end of 2016. This level of production would lift Iranian output to 4.3 million barrels per day, putting it behind only Saudi Arabia among OPEC members. Should Saudi Arabia cut production in the near term to boost oil prices, Iran could stand to benefit immensely in 2016 with an oil price at $70-$80. It is clear that Saudi Arabia wants to avoid giving Iran any additional power, which likely means that Saudi will keep the supply coming for the foreseeable future (translating into weaker oil prices for longer).
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    Jason Sawatzky

    A Canadian Energy expert 

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