Best of the Week
Most Popular
1. Climate Change Mass Extinction - Birds, Bees and Bugs: Going Going Gone - Richard_Mills
2.A Purrrfect Gold Price Setup! - Peter_Degraaf
3.Who Finances America's Borrowing? Recession Indicator for Independent Thinkers Part 2 - F_F_Wiley
4.America’s One-sided Domestic Financial War - Raymond_Matison
5.Gold Price Summer Doldrums - Zeal_LLC
6.Two Key Events Will Unleash Gold - Jim_Willie_CB
7.Billionaire Schools Teacher in NAFTA Trade Talks - Richard_Mills
8.Get Out Of Crypto Cannabis Bubble Before It Pops and Move Into Bargain Basement Miners - Jeb_Handwerger
9.Stock Market Could Pullback for 1-2 weeks, But Medium Term Bullish - Troy_Bombardia
10.G7 Chaos, Central Banks and US Fed Will Drive Stock Prices This Week - Chris_Vermeulen
Last 7 days
Trump Manchurian President Embarrasses Putin By Farcically Blowing his Russian Agent Cover - 19th Jul 18
The Fonzie–Ponzi Theory of Government Debt: An Update - 19th Jul 18
Will the Fed’s Interest Rate Tightening Trigger Another Financial Crisis? - 18th Jul 18
Stock Market Investor “Buy the Dip” Mentality is Still Strong, Which is Bullish for Stocks - 18th Jul 18
Stock Market Longer-Term Charts Show Incredible Potential - 18th Jul 18
A Better Yield Curve for Predicting the Stock Market is Bullish - 18th Jul 18
U.S. Stock Market Cycles Update - 18th Jul 18
Cayton Bay Hoseasons Caravan Park Holiday Summer 2018 Review - 18th Jul 18
What Did Crude Oil - Platinum Link Tell Us Last Week? - 17th Jul 18
Gold And The Elusive Chase For Profits - 17th Jul 18
Crude Oil May Not Find Support Above $60 This Time - 17th Jul 18
How Crazy It Is to Short Gold with RSI Close to 30 - 16th Jul 18
Markets Pay Attention Moment - China’s Bubble Economy Ripe for Bursting - 16th Jul 18
Stock Market Uptrend Continues, But... - 16th Jul 18
Emerging Markets Could Be Starting A Relief Rally - 16th Jul 18
(Only) a Near-term Stock Market Top? - 16th Jul 18
Trump Fee-Fi-Foe-Fum Declares European Union America's Enemy! - 16th Jul 18
US Stocks Set For Further Advances As Q2 Earnings Start - 15th Jul 18
Stock Market vs. Gold, Long-term Treasury Yields, 10yr-2yr Yield Curve 3 Amigo's Update - 15th Jul 18
China vs the US - The Road to War - 14th Jul 18
Uncle Sam’s Debt-Money System Is Immoral, Tantamount to Theft - 14th Jul 18
Staying in a Caravan - UK Summer Holidays 2018 - Cayton Bay Hoseasons Holiday Park - 14th Jul 18
Gold Stocks Summer Lows - 14th Jul 18
Trump US Trade War With China, Europe Consequences, Implications and Forecasts - 13th Jul 18
Gold Standard Requirements & Currency Crisis - 13th Jul 18
Focus on the Greenback, Will USD Fall Below Euro 1.6? - 13th Jul 18
Stock Market Outlook 2018 - Bullish or Bearish - 13th Jul 18
Rising Inflation is Not Bearish for Stocks - 13th Jul 18
Bitcoin Picture Less Than Pretty - 13th Jul 18
How International Observers Undervalue the Chinese Bond Market - 13th Jul 18
Stocks Trying to Break Higher Again, Will They? - 12th Jul 18
The Rise and Fall of Global Trade – Redux - 12th Jul 18
Corporate Earnings Q2 2018 Will Probably be Strong. What This Means for Stocks - 12th Jul 18
Is the Relative Strength in Gold Miners to Gold Price Significant? - 12th Jul 18
Live Cattle Commodity Trading Analysis - 12th Jul 18
Gold’s & Silver’s Reversals’ Reversal - 12th Jul 18
The Value of Bitcoin - 11th Jul 18
America a Nation Built on Lies - 11th Jul 18
China, Asia and Emerging Markets Could Result In Chaos - 11th Jul 18
Bullish Gold Markets in the Big Picture? - 11th Jul 18
A Public Bank for Los Angeles? City Council Puts It to the Voters - 11th Jul 18
Yield Curve Inversion a Remarkably Accurate Warning Indicator For Economic & Market Peril - 11th Jul 18
Argentina Should Scrap the Peso and Dollarize - 11th Jul 18
Can the Stock Market Close Higher For a Record 10th Year in a Row? - 11th Jul 18
Why Life Insurance Is A Must In Financial Planning - 9th Jul 18
Crude Oil Possibly Setting Up For A Big Downside Move - 9th Jul 18
BREAKING: New Tech Just Unlocked A Trillion Barrels Of Oil - 9th Jul 18
How Trade Wars Penalize Asian Currencies - 9th Jul 18
Another Stock Market Drop Next Week? - 9th Jul 18
Are the Stock Market Bulls Starting to Run? - 9th Jul 18

Market Oracle FREE Newsletter

5 "Tells" that the Stock Markets Are About to Reverse

The Truth About Iran’s Impact on Oil Prices

Commodities / Crude Oil Mar 18, 2015 - 02:51 PM GMT

By: Money_Morning

Commodities

Kent Moors writes: It’s getting to be crunch time in the negotiations between the West and Iran over Tehran’s nuclear program.

Despite an ill-advised attempt by U.S. Senators to scuttle the talks, it’s clear the negotiations in Geneva will continue.

Now, TV pundits have taken to the airwaves suggesting that an agreement would flood the market with Iranian oil.


Combined with production surpluses in the U.S. and elsewhere, the “instant” prognosticators are pushing their Armageddon pricing scenario again, putting additional pressure on oil prices.

Meanwhile, those playing the new “Iranian card” are shorting oil even further.

It’s just the latest example of a self-fulfilling prophecy.

It works like this…

Chicken Little of “The Sky is Falling Brokerage” hits the airwaves warning of a collapse in prices, only to earn huge off-camera profits based on what he just said.

Meanwhile, average investors are left holding the bag as share prices fall.

There’s only one problem with all of this instant “analysis” and it’s a big one…

The Tricky Business of Dealing with Iran

There is no question that the sanctions designed to limit Iran’s access to global oil sales and finance have had a sobering impact in Tehran.

While oil exports have continued to countries like China and India, the overall effect of the drastic cut in Iranian oil exports has been nothing short of a disaster for the domestic economy.

In addition, given the indirect way in which these exports must be financed – since Iranian access to Western sources of hard currency has been cut­ – even those consignments that can be sold cost more on both ends, further reducing the effective revenues to Iran and exacerbating the price tag.

For Tehran, therefore, an accord would allow more oil exports to be phased in, offering the realization of badly needed revenues. On the other side of the table, a verifiable move to end a suspected nuclear weapons program (which Iran has always denied) would yield additional regional security, welcomed by the West.

But the truth is that any accord reached in Geneva must overcome a profound amount of mistrust and animosity against the West in general… and the U.S. in particular.

That hostility has been all too clear since the 1979 revolution that overthrew the shah and brought in the ayatollahs as political leaders.

For many Iranians, the hatred of the U.S. goes all the way back to 1953 and a CIA-led coup against one of the most beloved populist leaders of the twentieth century – Mohammad Mossadeq.

But that’s not the biggest piece being missed by the talking heads on TV.

There’s another very important caveat: The “Iranian card” will have no short- or medium-term impact on oil prices.

An Industry in Absolute Shambles

Even assuming that an agreement is forged in Geneva – a very big if, considering the fate of previous attempts – there will need to be a very protracted process set in motion before any sanctions are lifted and even one additional drop of Iranian oil makes it to market.

For one thing, the sanctions have wreaked havoc on Iran’s production potential, which is already derived from the oldest continuously operating oil fields in the Middle East. It will take time to make arrangements for essential replacement parts, refurbishment, engineering, and related matters before any of this production can be ramped up. That won’t happen overnight.

For another, the Iranian shipping and delivery systems related to oil exports are in a shambles. Even aside from contracting for tankers and port availability, the current sanctions apply to both shipping financiers and insurance companies. Unraveling that Gordian knot will take a considerable amount of time and new banking arrangements… even if outside shippers are convinced this trade will be profitable.

Finally, the market share that used to be met by Iranian volume in several global markets (especially in Europe) has since been replaced by other sources given the current surplus supply. What’s more, the price is already depressed well beyond what Iran needs to stay afloat, and further discounting it to compete will merely make matters worse.

Iran is one of those OPEC nations (Venezuela and Nigeria being others) that need oil prices to be well north of $100 a barrel if they have any hopes of balancing their budget. In fact, one estimate has put the need as high as $142 a barrel – almost $90 higher than current prices in London for Brent benchmark crude.

But the biggest reality of all is in the hands of the West. Any accord will take time to finalize.

If that ever occurs, there will certainly be benchmark requirements in place that Iran will have to meet and verify before any oil is exported. So the relaxing of sanctions will occur in stages over time.

Of course, all of these real world truths can’t be explained in a sound bite on TV. So some of the talking heads would rather simplify and distort the issue, since it’s in the best interest of their bank accounts.

What else is new.

Source :http://oilandenergyinvestor.com/2015/03/the-truth-about-irans-impact-on-oil-prices/#deeplink

Money Morning/The Money Map Report

©2015 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules