Even despite the fact that Saudi Arabia and Iran are seeing tensions in their relations, bot of them can actually benefit from Iran’s comeback and lower oil prices. The thing is that they feel like putting up with very low oil prices temporarily only to kill the U.S.-led global shale oil industry, Masterforex-V Academy experts assume.
Indeed, Iranian oil exports may well trigger another major crash in the oil market, especially if Iran expands its oil production heavily and dumps oil prices the way it is doing no for Europe. Some experts say, that such a scenario may trigger another 30% plunge.
Such a scenario was discussed in the IMF’s 2012 forecast. At that time, the experts considered the impact of the anti-Iranian sanctions on developed economies. As for Saudi Arabia, back then, it offered the importers to make up for Iran’s lost market share. This prevented oil prices from sky-rocketing as the market calmed down. These days, Iran’s comeback is crucial for the entire market of crude oil in general and Saudi Arabia in particular, even regardless the confrontation between the 2 major oil exporters. Amid record-high oil inventories, Iran is now contributing to lower oil prices under $30/b, which is what Saudi Arabia actually wants.
You see, Saudi Arabia has been trying to create a new oil reality since 2014. This reality implies that Saudi Arabia’s rivals will have to suspend their costly oil projects. The strategy is mostly aimed at U.S. shale oil producers. They are seen as the biggest threat. With that being said, the oil drama of 2016 is whether Saudi Arabia’s efforts are going to undermine and destroy the American shale oil industry, which seems to have learned how to survive under crashing oil prices.
Without any doubt, Persian oil is coming back to a different market under different conditions unlike those seen in mid 2012 when oil prices used to be high. Apparently, today Iran is not going to make stellar profits from its oil exports, which will make it more difficult to attract foreign investments in their oil industry. With that said, the only reason why Iran is boosting its oil production and export is the effort to contribute to an oil investment decline around the globe to make other oil nations go out of business and yield their market share to Iran. Masterforex-V Academy experts say that Iran has a safety cushion of some 80 million barrels of crude oil inventories.
There are experts who predict that oil prices are going to rebound and rally up to $40/b or even $50/b by late 2016. Even if that’s the case, nobody can be sure that this recovery is not going to be followed by another crash. Well, this remains to be seen…
