The Fairfax press is running with Ambrose Evans Pritchard on the oil market today:
A global deal to lift sanctions against Iran could unleash a flood of oil on to world markets by next year just as crude output recovers in Libya and Iraq, triggering a slide in prices and a major shake-up of the energy landscape.
The prospect of cheaper oil is a welcome relief for the West, but poses a major threat to Russia and a string of countries that depend on oil revenues to finance their budgets.
The weekend deal in Geneva between Iran and key world powers opens the way for a gradual end to sanctions, provided the new government of Hassan Rohani delivers on pledges to curb its nuclear programme.
The accord should unlock 800,000 barrels a day (b/d) of global supply by next year in a market of 89m, rising over time as the country’s ruined oil industry comes back to life. Export curbs will stay in place for another six months, but a planned escalation of curbs will not occur.
Citigroup said the Geneva deal should cut global oil prices by $13 over time, enough to depress Brent crude below $100 and US crude below $85. The bank said falling energy prices could mark the death of the commodity supercycle, already struggling as China shifts to a new phase of “smart urbanisation”.
Alastair Newton from Nomura said the “geopolitical risk” premium in the oil price should fall but there will be no immediate softening of the oil embargo, adding that talks could still break down over Iran’s heavy water reactor at Arak.
Find below as well as video from CNBC on the issue:
If Iran proves to be serious this could take $10 out of the oil price which will be a long term boon for global growth but it’s too early to say.
