By Marcy Gordon, AP
WASHINGTON — A new wave of oil from Iran will flow into a global market awash in oil where prices are plunging to depths not seen in a dozen years. With a historic nuclear deal between Iran, the U.S. and five other world powers set into place this weekend, a European oil embargo on the world’s seventh-largest oil producer will end.
The impact may be felt widely when crude begins trading in Asian markets Monday, but the return of Iran to global energy markets created tremors even before the first trade was made. Saudi Arabia’s stock market plunged more than 5 percent Sunday. Saudi Arabia is the biggest oil producer within OPEC, the oil cartel with waning influence to which Iran also belongs.
Saturday was dubbed Implementation Day, when Iran was freed from international sanctions after being deemed as having dismantled most of its nuclear program under the deal established last summer. “Implementation Day for the nuclear agreement means a new oil day for Iran,” Daniel Yergin, vice chairman of research firm IHS and author of a Pulitzer Prize-winning book on the history of oil, said Sunday.
The oil market has anticipated the unchained tide of Iranian oil for months, and some of that may be reflected in new lows for oil prices in the past week. U.S. crude oil prices have trended down for a year and a half, and have fallen almost 40 percent in just the past three months. On Friday, the price slid 6 percent to US$29.42 a barrel. That compares with a high of over US$100 a barrel in the summer of 2014, and close to US$150 per barrel before the U.S. recession.
There are predictions of barrels going for US$20 soon.
Falling crude prices have led to lower prices for gasoline, diesel, jet fuel and heating oil. This has helped boost consumer spirits and encourage spending, but may also have slowed the overall recovery of the U.S. economy last year as major energy companies slash investments and jobs. The astonishing fall of oil has created jitters globally as economic growth for a major consumer, mainland China, ebbs. That has rippled to U.S. stock markets as well over apprehension that the economic contagion will spread.
For Iranian oil, a big question is how much and how fast. Already, some 38 million barrels of oil are in Iran’s floating reserves, ready to enter the market, according to the International Energy Agency. Iran has signaled it aims to put as much as 1 million to 1.5 million barrels daily into the market. But the IEA estimates that 400,000 to 500,000 barrels a day is more likely; some experts see 300,000 or so barrels coming in during the next six months.