Iran's Oil Price Fluctuation Chart in Recent Years; What Effect will $ 40 Oil have on Iran's Economy?

Iran's oil was in the $ 50 a barrel range last year and has fallen to very low levels with the spread of the coronavirus in the world.

NOURNEWS - In recent weeks, like global indicators, Iran's heavy oil, which makes up the majority of Iran's fields, has risen to $ 34.64 a barrel on Thursday. Despite the almost doubling of Iran's oil prices, the financial returns to the country will not be as high as those of other producing countries, as Iran's oil exports have reached several hundred thousand barrels per day due to sanctions, Which is much less than 2.7 million barrels per day two years ago. Many Iranian oil buyers began to cut back on oil purchases before and after the US decision to boycott Iran, following other oil-exporting countries such as Saudi Arabia and Iraq, which produce similar grades of Iranian oil. 

Nowadays oil prices are still much lower than at the beginning of the year. Last week, Mohammad Baqer Nobakht announced a sharp drop in Iran's oil revenues over the past nine years from $ 119 billion to $ 8.9 billion in 2019. However, this sharp decline occurred in a year when both oil prices were higher and Iran's exports were at a higher level. For this reason, it is predicted that Iran's oil revenues in 2020 will be much lower than last year. However, oil has risen to $ 40 a barrel and may be better off in the coming months with the extension of the OPEC Plus agreement and the growth of potential demand due to the withdrawal of many people from the quarantine and because of that the situation of Iran's oil industry and related industries might be better than before. 
Given Iran's declining exports, oil profitability through the sale of this commodity is not expected to be very crude. However, rising oil prices could have a positive effect on products such as gasoline and petrochemicals, as well as basic commodities such as copper, iron ore and steel. In this regard, the government has recently taken steps to distance itself from the sale of raw materials and expand gasoline exports. In a letter to Iranian Oil Minister Bijan Zanganeh, President Hassan Rouhani called for a gradual reduction in crude oil sales and a shift in production and sales of higher value-added products.

Venezuela, as a longtime strategic ally of Iran, has been a destination for gasoline sales in recent weeks. Major news agencies around the world have reported the arrival of five medium-sized Iranian tankers, which, like Iran, are under US sanctions. With one of the tankers carrying about 43 million liters of gasoline, Iran's total gasoline exports to Venezuela have risen to more than 200 million liters in the past month.

Contrary to popular belief that summer is a time for major repairs in refineries and winter is the peak of demand for oil, which leads to stronger prices at that time of year, with the approach of the summer season, oil has not yet recovered. It continues to lose lost price levels due to coronavirus outbreak, especially in March and April. 
The fall in oil prices in April was mainly due to the severe imbalance of supply and demand in the market, with the return of some businesses around the world and increased demand on the one hand and reduced sharp supply by OPEC Plus Group and its producers on the other, the price of black gold has been on the rise for the past six weeks.

In recent days, however, the outlook for the OPEC decision has been promising. The group, which will meet in Vienna as a video conference on Saturday afternoon, will discuss the possibility of extending the first phase of the production reduction agreement for one month or more. Some sources have reported that Russia and Saudi Arabia have agreed to extend production by 9.7 million barrels per day. However, they see the decision as "highly dependent on the members" and in recent days, they have been in talks with less committed members of the group, such as Iraq, Nigeria and Kazakhstan. It is said that these countries have assured that after that, they will increase their commitment to the production quota according to the agreement, although there is doubt about their behavior in practice. Meanwhile, Iraq has the most deviations from the agreed production targets. The country has fulfilled less than half of its commitment to reduce supply last month. However, an informed source told Reuters that Iraq had promised to increase its commitment to the agreement. Baghdad blames technical problems, including the lack of control of about 500,000 barrels of daily oil production in the Kurdistan Region, for overproduction. What is clear is that the outcome of this meeting will largely determine the supply side of the market for the next few months.

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