Making Iran Great Again. The Energy Report 12/15/2020
Iran’s government is looking to make Iranian oil great again! Iran says it will raise its crude oil and condensate by 70% to 4.5 million barrels a day by next March. The announcement was inspired by promises from Joe Biden and his Climate Czar John Kerry to rejoin the Iranian P5+1 nuclear deal. Joe Biden has signaled that he wants to reverse President Trump’s maximum pressure campaign on Iran and reset relations with the terrorist regime as a member in good standing in the “Axis of Evil”. Iran expects that Joe Biden will lift the sanctions on them in exchange for basically nothing.
Yahoo News reported that Iranian President Hassan Rouhani said if the United States returns to the Iran nuclear deal, his country will follow within an hour. At the same time, he said he would not discuss any changes to the accord or restrictions on Iran’s ballistic missile program and would allow Iran to get a nuclear weapon in the future.
At the same time, U.S. oil producers will be hurt by the potential competition with Iran for market share, but that is ok because Joe Biden wants us to get off oil anyway. It’s not that Iran oil is any cleaner than U.S. oil. It’s just better. You see, Iran’s oil is somehow more virtuous in Joe Biden and John Kerry’s world because globalization takes precedent over saving the planet. It is also a small price to pay to save face and try to convince the world that the bad Iranian nuclear deal was somehow a good deal.
This, of course, would be a great deal for Iran, which after sanctions, desperately needs the cash. You know things are bad when Venezuela is like one of your best customers. No word on what they will do with an influx in cash. In the past, Iran has used its extra cash to fight proxy wars in the region with Israel and Saudi Arabia and spent money on incendiary explosive devices that killed and maimed U.S. soldiers in Iraq and extended the war. Iran has provided significant support to Hezbollah, Hamas, and the Islamic Jihad Movement in Palestine. Iran recently has been accused of sending weapons to Libya in violation of U.N. Sanctions.
The Warsaw Institute reported in a letter to the United Nations Security Council last May, that Israel’s U.N. envoy Danny Danon accused Tehran of sending Iranian-made advanced weapons to Libyan warlord Khalifa Haftar. Danon asserted that Tehran continues to transfer advanced weaponry illicitly throughout the region, citing ‘Dehlaviyeh’ anti-tank guided missile systems used by militias associated with General Haftar’s forces in Libya.
So while the market may have to start pricing in more Iranian oil, it may be offset by less U.S. oil hampered by financial constraints and more regulation. Just wait to see what happens to U.S. oil output when we rejoin the Paris Climate accord. More US oil and gas jobs will leave and be picked up in places like Iran and China. While the agreement will have no real impact on climate, the fact that we are cooperating with the likes of Iran and China should make us feel warm and fuzzy on the inside.
Still, despite Iranian promises of more production and a weak demand outlook from OPEC yesterday, the crude oil market is resilient. Oil prices fell hard after OPEC put out a scary weak demand forecast for their oil but rebounded because the market realizes that the vaccine progress on Covid19 is an absolute game-changer.
Marketwatch reported that, “The Organization of the Petroleum Exporting Countries, or OPEC, on Monday cut its forecast for 2021 growth in oil demand, citing “uncertainty surrounding the impact of COVID-19 and the labor market” on the outlook for transportation fuel in developed economies during the first half of next year. OPEC cut its forecast for world oil demand growth to 5.9 million barrels a day, down 350,000 barrels a day from its previous projection. In its monthly report, OPEC pegged 2020 oil demand at 89.99 million barrels a day, a decline of 9.77 million barrels a day from 2019 and slightly below its previous estimate.
Reuters reports that, “Global oil demand growth will reach 5.7 million barrels per day next year, according to the International Energy Agency, which cut its 2021 forecast by 170,000 barrels per day from its estimate a month ago. Demand for aviation fuels is expected to remain weak next year, even with the rollout of a vaccine and this shortfall is the key motive for the IEA’s overall downgrade. “In 2020, we have seen unprecedented and historic turbulence in energy markets,” the IEA said in its monthly oil market report.
On top of that, those betting on oil prices lower for longer are starting to price in the reality that we are on the verge of a better future. A future where the coming demand surge in oil maybe not be fed due to a significant drop in oil and gas investment.
That is why The Energy Report has maintained its bullish outlook as we predicted months ago that the lows for oil were in. Like the stock market, the oil market has caught many as being too pessimistic, and with the combination of low-interest rates and strong leadership in getting a vaccine, we are starting to see the light at the end of the Covid tunnel.
Natural gas is looking like a bullish reversal as some colder temperatures start to turn things around. LNG exports should pick up in the coming weeks giving natural gas a chance for a bull run. Still, if the weather warms up again, the movie could fail. We were recommending buying calls, and we always like that play.
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About the author
Mr. Flynn is one of the world’s leading energy market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets.
Phil Flynn’s accurate and timely forecasts have come to be in great demand by industry and media worldwide. His impressive career goes back almost three decades, gaining attention with his market calls as writer of “The Energy Report”.
He is a daily contributor to Fox Business Network where he provides daily market updates and analysis. Phil’s daily commentary is also featured in Futures Magazine, International Business Times, Inside Futures, 312 Energy, Enercast, among many others.
Phil is a lifelong resident of Illinois. He attended Daley College in Chicago before beginning his career on the trading floor of the Chicago Mercantile Exchange which eventually led him and his team to The PRICE Futures Group.
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