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Opinion ought ought ThoughtStream

Matt Loffman and Marina Ivanova, Douglas Westwood

Tackling geopolitics and oil prices busy week for global news mid- to dollar-based equities. The Euro has OPEC producer after Saudi Arabia. In

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July sent crude prices plummet- already fallen 18% against the dollar 2014 total Iranian production, heavily ing. The agreement between the Greek in the past 12 months and a Greek exit driven by gas and condensate produc- government and European ? nancial would likely dampen this signi? cantly tion from the giant South Pars offshore ministers left a lingering uncertainty as investors look nervously at other debt- ? eld, amounted to 6.7 MMboe/d. hanging over the Eurozone, with several laden Euro members. A strong dollar During the sanction period, however, high pro? le organizations remaining weakens international oil demand as the Iran had limited access to technology openly critical of it. Elsewhere in the commodity, traded in US dollars, is more from the West and complex LNG export news, erratic Chinese equity markets expensive on a relative basis. terminal projects stalled. Vast capital and a landmark Iranian nuclear deal in? ows will now be required to develop all served to dampen crude prices. The under-invested Iranian ? elds, however, concern for oil markets centers around due to the large reserves base, Douglas

The Euro has already several factors: the consequences for Westwood believes appetite to invest fallen 18% against the economic stability and growth in Europe in Iran will be strong amongst major and China, the prospect for additional operators.

dollar in the past

While no sanctions will be lifted crude volumes into an already over- before December, Douglas Westwood supplied market and the strengthening 12 months and a Greek believes that Iranian liquids produc- of the US dollar.

exit would likely dampen

Greece itself consumes less than tion will rise to a 2015 average of 3.5 0.4% of global crude, produces fewer MMb/d, based on pre-sanction produc- this signi? cantly as than 9000 b/d and had an economy tion levels and available oil currently of US$240 billion last year – around stored in storage tankers off Iran. investors look nervously 0.3% of the global total. An exit from Further production gains are expected at other debt-laden Euro the Euro, which now seems less-likely, as additional development phases of threatens the breakup of the Eurozone South Pars come onstream, while the members.

itself, a major global economy and removal of sanctions will clear supply consumer of 9.7 MMb/d. Should Greece bottle necks out of the Persian Gulf. “walk away” from her debts, exposure IOC investment in the country’s huge to the debt in other member states, After 10 years of diplomatic negotia- potential will further boost production coupled with premiums for borrow- tion, the UN P5+1 countries (the US, as sanctions are rolled back, though any ing (particularly in southern Europe) the UK, France, China, Russia and new projects will see a lag of several could be expected to usher in another Germany) at last reached an agreement years from lease acquisition to produc- period of recession. Estimates from to unwind economic sanctions on Iran tion phases.

the International Monetary Fund sug- in return for signi? cant international Global oil prices have been weighed gest a contraction of between 2% and control and surveillance over its nuclear down in recent months by resilient 5% is possible. While this picture activities. The long-awaited deal will US production, record Saudi output, remains uncertain, historical linkage revive foreign investment in Iran, as continued weakness on the demand side, of oil consumption and gross domestic Western international oil companies and the Grexit prospect. While commod- product growth would imply a potential (IOCs) renew pre-sanction projects. ity prices are unlikely to be aided by an reduction of 360,000 boe/d per year in Brent dropped $1.15 to $56.70/bbl on opening of Iranian taps, the true tidal consumption. Tiny indeed, but in an the back of the announcement, with wave of Persian crude could be later over-supplied market, every portion of markets fearing a worsening of the rather than sooner. demand is important. global supply glut.

Ever-deeper uncertainty within Iran holds the world’s fourth-largest Matt Loffman, manager, Houston, and

Eurozone economies, however, is oil reserves and second-largest gas Marina Ivanova, researcher, Douglas likely to increase the ? ight of capital reserves, while being the second largest Westwood.

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