Its an interesting start to 2016 for commodity markets with tensions over the weekend between Saudi Arabia and Iran spilling out this morning as the kettle and pot call each other out as black.
With Saudi Arabia hell bent on executing anyone who doesn’t agree with the Saudi absolute monarch – including a prominent Shia cleric – this drove Iranian supporters to storm the Saudi embassy in Tehran amid accusations from the Iranians that the Kingdom supports terrorists. Well, duh. The Saudi’s have replied by kicking out all Iranian diplomats from their country with similar accusations. And duh again.
The real news beyond the hypocrisy is that Iran is signalling a production boost from its crude fields as sanctions are removed:
From Bloomberg:
Iran is trying to regain its lost share of global crude sales and has no intention of harming the oil market with its planned increase in production once sanctions are lifted from its economy, Oil Minister Bijan Namdar Zanganeh said.
“The oil ministry intends to boost Iran’s crude oil exports by an aggregate of 1 million barrels a day in two phases (over six months),” Zanganeh said, according to the official Islamic Republic News Agency.
Saudi Arabia, the world’s largest crude exporter, has led OPEC in fighting for market share against higher-cost producers such as shale drillers in the U.S. The group set aside its output target of 30 million barrels a day at a meeting in Vienna last month.United Nations nuclear monitors in December ended their 12-year probe of Iran’s research into atomic-weapon technologies, moving the country a major step closer to relief from sanctions. Iranian oil companies and banks may be able to return to international markets by mid-January, based on the pace at which the nation is disabling nuclear infrastructure.
The problem of course is the entire oil complex is oversupplied from the Middle East to the Mid-west USA, to the tune of at least 3 million barrels a day, and with no production cuts in sight, oil markets have fallen spectacularly in 2015, surpassing the GFC low at $38USD per barrel on Brent markers:
How this latest blip on the oil production radar will gone down just as the two nations ramp up their sabre rattling is unknown, but trading in oil is renowned for its volatility. And this just added another volatile mix into the pot.
Addendum: this is how one can view the Sunni/Shia rift in the Muslim world
