The International Energy Agency’s (IEA) head of oil markets said on Sunday that there is “no compelling reason to doubt that Iran could ramp up quite quickly in terms of technical capacity.” Most traders and analysts have been estimating about a year before Iran can raise production from around the current level of 2.8 million barrels a day to a pre-sanctions level of nearly 4 million barrels a day. Iran’s goal is around 4.7 million barrels a day.
Citing the examples of Venezuela and Libya, the IEA has some firm footing. Following a shutdown in 2002, Venezuela lifted crude oil output by 2 million barrels a day in just 4 months according to a report at Bloomberg. Following the downfall of Libya’s Qaddafi in 2011, Libyan raised production by 1 million barrels a day in only six months.
On Monday Iran’s oil minister said once sanctions are lifted the country will focus on lifting production regardless of price. Many observers expect sanctions to be in place at least until the end of this year. Once the sanctions are lifted, they are anticipating another 12 months before production rises by a million barrels a day.
If the Iranian oil minister is correct however, by this time next year another million barrels a day will be flowing from the country’s wells. That does not augur well for prices. Instead of being a floor, $50 a barrel may become the new ceiling.
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