Oil prices plummet in Asia over concerns about Iran crude return

Oil prices have dropped in Asian markets amid speculations that a possible return of Iran’s crude oil to the global market may cause a supply glut.

US benchmark West Texas Intermediate for August delivery lost 17 cents on Tuesday to hit USD 60.21 a barrel in late-morning Asian trade, while Brent crude for August also fell 14 cents to USD 63.20.

“The key issue is about Iranian crude possibly coming back to the market,” Daniel Ang, an investment analyst with Phillip Futures in Singapore, was quoted by AFP as saying.

The analyst noted that market observers “are concerned over how fast Iran can resume exports to the West” after Tehran clinches a comprehensive nuclear deal with the six world powers over its nuclear program.

“If the speed [of reaching an agreement with the P5+1 group of countries] is very fast, this could push the market into further oversupply,” Ang added.

The Islamic Republic and the P5+1 group of countries – the US, the UK, France, Germany, Russia and China – reached a mutual understanding on April 2 in the Swiss city of Lausanne, which is considered a prelude to the achievement of a comprehensive deal over Tehran’s nuclear program before a self-designated deadline at the end of June. A key point of the Lausanne statement was a promise to lift a series of economic sanctions on Iran – including those on the country’s energy sector, allowing Tehran to boost its crude exports to pre-sanctions level and claim its fair share of the global market.

Iran has already announced that its return to the global oil market will not necessarily lead to further drop in oil prices, provided that other producers adjust their crude output to make room for Iran.

Speaking to reporters on June 6, Mehdi Asali, Iranian Ministry of Petroleum’s secretary for OPEC affairs and relations with energy organizations, said the country’s renewed presence in international oil market will not have a negative impact on crude prices, provided that other oil producers that have taken up Iran’s share of the market reduce their output to help the market reach a balance at a new point.

“If countries that have been filling Iran’s void in the market do not reduce their output upon Iran’s return, oil prices may fall and those countries would be losers because Iran would double its crude exports and even if prices are reduced by half, the country will not suffer any financial repercussions,” he warned.

Also, speaking to reporters following OPEC’s ministerial meeting on June 5, Iran’s Minister of Petroleum Bijan Zanganeh said, “I wrote a letter to OPEC member countries. It is our right to return to the market.”

He added that other OPEC members should cut production to make room for Iran’s return to its former production level so that Iran’s re-entry into the market would not lead to a new drop in oil prices.

By Press TV