Iran's oil production will rise only modestly this year and next, but it will be enough to stop global crude supply and demand from rebalancing in 2016, according to a Reuters poll of oil analysts' forecasts. The world's biggest oil producers from both within and outside the Organization of the Petroleum Exporting Countries (Opec), including Saudi Arabia and Russia, meet in Doha on Sunday to discuss a proposed output freeze at January's levels.
They are attempting to support crude oil prices, which have fallen by 50 percent in the last 18 months. A Reuters survey of eight oil analysts shows Iranian production, which is expected to be around 3.2 million bpd in March, is forecast to rise to 3.4 million bpd by mid-2016 and to 3.5 million bpd by the end of the year, reaching 3.8 million bpd by the end of next year.
Even with an output deal, rising supply from Iran, which is the third-largest producer within Opec, will prevent the market from rebalancing this year, the analysts said. "Without additional Iranian crude exports, the oil market would even have turned into a deficit by the end of 2016. That's probably not the case now," Hannes Loacker of Raiffeisen Capital Management said.
Since the prospect of a freeze first surfaced in February, oil prices have risen by 35 percent to around $43 a barrel, having hit their lowest in over a decade in January. Many higher-cost producers, such as shale oil drillers in the United States, have been forced to cut output and overall global supply is expected to fall further. But this is against a backdrop of a deteriorating global economy. This week, the International Monetary Fund cut its global growth forecast for the fourth time in a year to just 3.2 percent.
And the IEA said in its monthly report it does not expect the market to rebalance before 2017, and any deal on output would have a limited impact on overall supply, while Opec itself forecast a drop in global demand growth this year. Iranian exports, which until January had been limited by international sanctions over Tehran's nuclear programme, are expected to rise at a modest pace.
The poll showed exports are expected to reach 1.6 million bpd by the middle of this year, before edging up to 1.7 million bpd by the end of 2016 and to 2 million bpd by the end of 2017. "We believe that the amount of oil supplied by Iran would not be more than the supply cuts in the global market, mainly by the production disruptions in the high-cost producers," Serkhan Sahin, analyst at Thomson Reuters' Oil Research and Forecasts said.
The analysts polled all said Iran will not take part in any output deal until it recaptures its pre-sanctions market share and returns to a production target of about 4 million bpd, something Iranian oil officials have already made clear. Iran has ruled out freezing its output at January levels, which sources have estimated to be around 2.93 million bpd. Iran is likely to struggle to reach this 4 million bpd target because of a lack of investment and availability of technology to upgrade and develop its oil fields.
"Longer term, Iran has the underlying resource potential to achieve organic production growth... This would require substantial increases in investment, including foreign investment, which is out of the question at anything close to current oil prices," Raymond James analyst Luana Siegfried said.
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