53 Billion Barrels Of Oil With No Place To Go

Iran raised a few eyeballs after Iranian President Hassan Rouhani said that Iran has a new oil field that would increase Iran's proven reserves by an impressive 53 billion barrels of oil. Overnight, this would increase its proven reserves by about one third. The only problem is, with sanctions in place and the lack of capital investment, that oil might not see the light of day for decades to come. There is also some speculation that the timing of the announcement might be a way to tweak its rival Saudi Arabia just before they are trying to price its Saudi Aramco IPO.

Regardless, Dow Jones reported that an Energy Department official has confirmed that sanctions on iran have removed about 2.0 million barrels from the global marketplace. This comes a day after it was reported by Reuters that Iran is enriching uranium at its underground Fordow site. The reports say that Iran is rapidly accelerating enrichment more broadly according to a report by the U.N.'s International Atomic Energy Agency. Iran is making further breaches of its 2015 nuclear deal with major powers and reduces the odds that a deal with Iran to lift sanctions can be had and this is bullish for oil.

This comes as that same official suggested that the U.S. will hit a production level of 3.0 million barrels a day. Still, that same official seems to suggest that despite the increase in supply, he sees U.S. shale producers pulling back. He says that it is a healthy sign that shale producers are going after value and not volume.

IMO rules are causing wide swings in the market. Bloomberg reports that late last week, high-sulfur fuel oil for December was trading at a discount of almost $30 a barrel to Brent, according to data from ICE Futures Europe. In June, the same contract was at a $13 discount. The ship-fuel rules, known as IMO 2020 by traders, are expected to favor low-sulfur crudes, and both Urals and Arab Light have a relatively high content of the pollutant.

Oil prices are moving positively on trade developments. According to reports, it appears that the Trump Administration is going to delay EU auto tariffs as negotiations seem to be bearing fruit. Also, there is speculation that Trump will say some positive things about U.S./China trade talk progress. Still, behind the U.S. China trade talks is the fact that protests in China are becoming more violent. Some fear this could complicate trade progress.

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Michelle Bell 3 weeks ago Member's comment

Just said only 2.2B is extractable lol