Iran Unleashes Oil Flood, Will Quintuple Crude Revenue In 2016

Tyler Durden's picture

On Saturday, Iran marked what President Hassan Rouhani called a “golden page” in the country’s history when the IAEA ruled that Tehran had stuck to its commitments under last year’s nuclear accord.

Moments after the ruling was handed down, the US and the EU each lifted nuclear-related financial and economic sanctions on the “pariah state,” much to the chagrin of Israel and Tehran’s regional rivals who view the West’s rapprochement with the Iranians with deep suspicion.

"Everybody is happy except the Zionists, the warmongers who are fuelling sectarian war among the Islamic nation, and the hardliners in the U.S. congress,” Rouhani said, referring directly to Israel, the Saudis, and GOP lawmakers in the US.

In addition to the never-ending feud with the Israelis, Tehran is embroiled in a worsening conflict with Riyadh triggered by Saudi Arabia’s execution of prominent Shiite cleric Nimr al-Nimr and subsequent attacks on the Saudi embassy and consulate in Iran. The argument has raised the specter of an all-out conflict between the Sunni and Shiite powers and stoked sectarian discord across the region.

With sanctions lifted, Iran will now have access to some $100 billion in frozen funds and will be able to increase its oil revenue exponentially even as prices remain suppressed.

It’s easy to see why the Saudis and other Gulf Sunni monarchies are nervous. Iran plans to immediately boost output by 500,000 b/d with an additional 500,000 b/d coming online by year end. “The oil ministry, by ordering companies to boost production and oil terminals to be ready, kicked off today the plan to increase Iran’s crude exports by 500,000 barrels,” the official Islamic Republic News Agency reported on Sunday, citing Amir Hossein Zamaninia, deputy oil minister for commerce and international affairs.

Iran could haul in more than five times as much cash from oil sales by year-end as the lifting of economic sanctions frees the OPEC member to boost crude exports and attract foreign investment needed to rebuild its energy industry,” Bloomberg reports, adding that “the lifting of sanctions means Iran can immediately boost oil revenue to about $2.35 billion a month, based on the country’s estimated current output of 2.7 million barrels a day and oil at $29 a barrel.”

Even if oil hovers between $30 and $35 a barrel, Iran will be pulling in some $3 billion a month by summer and nearly $4 billion a month by December.

"Iran's aging oil fields may present some challenges to the pace at
which it can physically raise production," Deutsche Bank wrote last year, as prior to the signing of the accord. Here's a bit more color:

Changes to Iran's sustainable production capacity in the medium term will likely depend partly on the speed and extent to which international oil companies (IOCs) invest in the development of Iran’s oil resources. Currently, 38% of Iran's oil production originates from three large fields and associated areas which began production decades ago (Gachsaran 1934, Ahwaz 1959, Marun 1965). Of the original resource contained in these three "super-giant" fields, only 23% remains now.



Further development drilling will likely be required in order to maintain production, and secondary techniques such as CO2 or associated gas injection may be required to improve the recovery rate and counteract falling reservoir pressure. Prospects for higher production would be improved by IOC participation. However, foreign investment has lagged not only because of sanctions, but also because of the government's buyback agreements which are considered unattractive.

On Sunday, Rouhani said the country needs between $30 and $50 billion in foreign investment in order for the country to hit its 8% growth target for the year. "Untapped potential in many industries indicates that domestic demand cannot solely push the economy toward eight per cent growth," he said. "Attracting foreign investment will be the best way of using the opportunity of sanctions relief to boost the economy and security." 

But according to Israel, it's all a charade. On Saturday, The Times of Israel said that according to an unnamed "source in Jerusalem", the first thing Iran will do is send money to Hezbollah. "The implementation of the agreement would have a direct impact on the region, as terror groups Hezbollah and Hamas — both recipients of Iranian largesse — found themselves in possession of new and modern weaponry," The Times wrote. A statement from PM Netanyahu's office reads: "Even after the signing of the nuclear agreement, Iran has not abandoned its aspirations to acquire nuclear weapons, and continues to act to destabilize the Middle East and spread terrorism throughout the world while violating its international commitments."

We wonder whether Netanyahu would say the same thing about the Riyadh, where "acting to destabilize the Mid-East and spread terror throughout the world" is an explicit foreign policy aim. 

In any event, Iran just got a $100 billion windfall and will be around $2 billion richer each month by the end of the year. The return of Iranian supply "will have an immediate impact in the spot market” Robin Mills, CEO of consultant Qamar Energy, told Bloomberg by phone. “Putting oil in the market is going to push it down." "Iran’s additional crude shipments have the potential to further depress prices, perhaps to as low as $25 a barrel,” Nomura's Gordon Kwan added on Sunday.

As for what effect a richer, more prosperous Iran will have on regional stability, we'd suggest that anything that serves to counter Saudi influence is probably conducive to a more secure environment. Besides, things can't get much worse in the Mid-East, so it's hard to see the downside.

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J S Bach's picture

$20 barrel oil here we come.

remain calm's picture

The oil industry is going to get crushed. I guess obama did like Texas being so economically vibrant, well he fucked them. Unfortunately, this just accelerates the market to the down side.

johngaltfla's picture

The Middle East markets have voted on this with Saudi down over 5% and Qatar over 7%

01.17 Middle East Markets Plunge as Iran Plans Massive Oil Exports

remain calm's picture

Agree with you Obama is saying fuck you Saudi Arabia too. 

Looney's picture

Now, even if the Saudis decide to “bestow” a cut in oil production upon the world, it will be immediately over-pumped by the Persians.

Saudenfreude, you royal bitchez! ;-)


KesselRunin12Parsecs's picture
KesselRunin12Parsecs (not verified) Looney Jan 17, 2016 10:07 AM

"But according to Israel, it's all a charade."


LOL, Thanks for starting out my day with a good belly laugh!

Buckaroo Banzai's picture

"Besides, things can't get much worse in the Mid-East, so it's hard to see the downside."

Now, that was funny.

greenskeeper carl's picture

ya i had a laugh at that one too. Famous last words...


This won't be welcome news in Canada, thats for sure. This is sure to exert more downward pressure on oil. Same with the US, those high paying shale-driven jos have been one of the few bright spots in the US job market. More of those will disappear. But, the oil will still be there, and once its economical to do so, someone will go pump it out of the ground. This may sound overly simplistic, but IMO if the hajjis want to turn up the pumps and sell their oil for cheap, we should buy all of it we can and leave ours in the ground.

Muddy1's picture

"The oil industry is going to get crushed. I guess obama did like Texas being so economically vibrant, well he fucked them.  Unfortunately, this just accelerates the market to the down side."

Obama has done it right up the bung hole to Texas and all states which produce fossil fuels.  His war on fossil fuels is almost complete.  His admnistration has stopped futher leases for coal mining on federal lands.  He is a hater of America beyond belief.  But let's not forget Lurch I seved in Viet Nam Kerry who also hates America.  He was right in there doing the Iran deal.  And behind the scenes Valerie Jarrett and her secret meetings months ago with Iran's leaders.

Mr. Universe's picture

How about this for mirth and merrymaking?

Prospect of the Islamic Republic pumping an additional 500,000 barrels a day sends stock markets in Dubai and Saudi Arabia into tailspin

All seven stock markets in Gulf states tumbled as panic gripped traders. Dubai's DFM General Index closed down 4.65pc to 2,684.9, while Saudi Arabia's Tadawul All Share Index, the largest Arab market, collapsed by 7pc intraday, before recovering marginally to end down 5.44pc at 5,520.41, its lowest level in almost five years.

The Qatar stock exchange, fell 7.2pc to close at 8,527.75, and the Abu Dhabi Securities Exchange shed 4.24pc to finish at 3,787.4. The Kuwait market returned to levels not seen since May 2004 as it slid 3.2pc lower, while smaller markets in Oman and Bahrain dropped 3.2pc and 0.4pc respectively.


Four chan's picture

i have full confidence the jew will make money off this situation too 

ali_baba's picture

Of course they will. This is where the Juden will ally with Russia and dump the Americans. The U.S economy is all set up to take the fall. 

clymer's picture

funny how anyone could actually believe that the teleprompter-reading sock-puppet for z-big and Heinz K is actually making decisions himself on anything besides which golf course wants to get some time on this spring

J S Bach's picture

You guys shouldn't blame Obongo for the oil situation.  All of our problems stem from our counterfeit monetary system... period.  The teleprompter in chief is merely a puppet of the money powers.  Bush or any other sychophant leader would be in the same situation.  Their "reward" for subservience is 4 or 8 years on a cushy airplane... million dollar vacations and delusions of grandeur.  Again, look for the source if you are going to place true blame.

ebear's picture

"This won't be welcome news in Canada, thats for sure."

Anything that puts Saudi Arabia on the ropes is welcome news to this Canadian.

mkkby's picture

On the ropes?  You stupid ignorant canuck. 

SA ENGINEERED this whole thing to punish russia and force them to back out of syria.  You think any of those kings or princes will give up one less jet or yacht?  The dirty rabble in the street will have less welfare though.

philipat's picture

There is still a bad smell about this and something behind the cutain as yet unexplained, even on ZH. The world economy is flat so far, not collapsing (Yet). So oil consumption, whilst soft, hasn't fallen off a cliff. So how is that consistent with a decline in oil price from $120 to $29? What we know is:

  • Kerry goes to Riyadh and shortly (Actually immediately) thereafter, The Saudi start pumping.
  • By that time Kerry/The US already knew the timing of Iranian oil coming back on the market versus the removal of sanctions timetable.
  • The MSM promote the story that the Saudis just want to kill the US shale industry as a strategic business exercise which they, presumably, never saw coming earlier, despite it being their only income source.

I truly don't understand what is going on here but the above makes no sense, so what do ZH'ers think? There are some suggestions that Kerry told the Saudis to cover the losses with derivatives, which the Treasury/Fed would cover with freshly printed $$$ as counterparty so as to attempt to crush Russia. That seems plausible but only if one accepts that the whole US Administration is so fucking stupid as not to see (Or care about?) the impact on the US economy via the Energy sector and, presumably, totally misunderstanding Russia's resolve. And the determination of the "Free World" to dump the almighty Dollar just as soon as possible so as to escape the threat of further future sanctions?


remain calm's picture

answer: YES

And they have no fucking idea what they are doing, they are retarded. They ultimately know they will have created a huge crisis and unimaginable chaos and this will put them in a position to only GAIN GREATER CONTROL AND WEALTH.

Buckaroo Banzai's picture

You have to consider these important facts when trying to understand what is happening:

1) this is an administration full of socialists and Marxists. They don't know the first thing about how markets work.

2) We know that Obama is a Muslim by birth, according to sharia law, and almost certainly a Muslim by faith. What we don't know for sure is, what kind of Muslim: Sunni or Shia? All Muslims have to pick sides, and undoubtedly this has thrown a huge fucking curve ball into U.S. Middle eastern policy.

3) Valerie Jarrett must be presumed to be Iranian, or having Iranian loyalties or sympathies, based on her personal history. We know for a fact that she's an evil cunt.

4) John Brennan, head of the CIA, is a crypto-Muslim, who converted sometime during his stay in Saudi Arabia many years ago. Which means we may have competing Muslim intra-faith loyalties inside the administration at the highest levels.

5) the administration is riddled with Muslim Brotherhood members.

6) the administration hates Texas possibly more than it hates Russia.

Add all this up, and you get one ginormous clusterfuck. Is it any surprise it looks like a confusing mess from the outside? Because that's the way it is on the inside.

t0mmyBerg's picture

I think this is the best comment I have ever read.  It is amazing that noone seems to understand these items for the country should be up in arms if they understood these things.  The head of the fucking CIA is a god damned muslim plant and the brotherhood is crawling all over the place.  And the country elected, twice, a fucking muslim communist as president.  For fucks sake. 

As far as the Iranian thing leading to much lower oil prices, it may create the final swoon, but much of the entirely fungible oil Iran produces must already have been making its way into the world, it will just be above board now and maybe their tech will impprove as oil companies can now get involved without stigma.  I have started buying spot crude contracts and selling puts.  This is probably a classic case of sell the rumor buy the fact.

SoilMyselfRotten's picture

With all this new found oil revenue we can assume Iran will now escalate their nuclear program with which to wipe Israel off the map. Someone will have to bomb their oil facilities now in order to maintain the peace.

Miles Ahead's picture

You gotta assume Buckeroo Banzai was either being very sarcastic and funny, or someone forgot his meds.  I'm guessing /sarc. 

I certainly hope so.  Muslim by Sharia law and all Muslims have to pick sides... whew.  Heavy stuff there.


On the other hand; tommyBerg, seek help.  Quickly.  A better reason to short spot crude, one will never find.


t0mmyBerg's picture

Will do.  Right after you.  Can I assume oyur last name is Brennan or you are one of his aides?  I will be happy to take the other side of any trade you want to do.

SoilMyselfRotten's picture

Sometimes you can't lay it on thick enough

Selly2k's picture

Why a grown man like you is scared of Moslems? You need to get out of your 5 men village and see the world. And not be so claustrophobic. It will help to clear all fiction from your head.

balanced's picture

Selly2k, only a coward cannot tell the difference between fear and recognizing your enemy.

Tejano's picture

Good news for Haliburton, Schlumberger, et al. The puppets performed well.

Kayman's picture


 "what kind of Muslim: Sunni or Shia? "

Come on now. Middle name Hussein and you can't figure which branch of the crazies he is on ?

gonetogalt's picture

I had assumed Sunni, but wasn't sure. Thanks for that, it's clear now.

Volkodav's picture


stop posting till you can make sense...

Huckleberry Pie's picture

Leaked by the SS that B.O. puts on a silly little hat and prays towards mecca five times a day. No wonder the SS keeps having problems...when you have to witness this crap?!


Valarie Jarrett was born in Iran.


As odd at it seems, Russia seems to be a beacon of hope, while the U.S. is following the USSR path; to a tee.

Sturm und Drang's picture

<----Terry Jones

<----John Hagee

JRobby's picture

If you are looking for sense, you are in the wrong dimension and should seek transportation to a different one.

In a debt / energy based world economy, there must be continuous hot and cold wars over resources.


HowdyDoody's picture

From the "Well, that didn't take long department":

US imposes sanctions on Iran for ballistic missile program only hours after sanctions were lifted.
Sun Jan 17, 2016 3:16PM

"The US Department of the Treasury says it has imposed new sanctions on Iran for its ballistic missile program.

The Treasury Department made the announcement in a statement issued on Sunday, only a day after sanctions targeting Iran’s nuclear energy program were lifted.

The statement said five Iranian citizens and a network of companies based in the United Arab Emirates and China were added to a US blacklist."

spacecadet's picture

"There are some suggestions that Kerry told the Saudis to cover the losses with derivatives, which the Treasury/Fed would cover with freshly printed $$$ as counterparty so as to attempt to crush Russia. "
Precisely. The alternative ( losing the petrodollar ) is a far worse outcome 

Berspankme's picture

I still believe it's all an attempt to crush Russia and I believe the unintended consequences are going to be massive

Fractal Parasite's picture

Michael Reagan, the eldest son of Ronald Reagan, in March 2014:

“I suggest that President Obama might want to study how Ronald Reagan defeated the Soviet Union. He did it without firing a shot, as we know, but he had a super weapon - oil. Oil was the only thing the Soviets had in the 1980s that anyone in the rest of the world wanted to buy, besides ICBMs and H-bombs, and they weren't for sale.  Since selling oil was the source of the Kremlin's wealth, my father got the Saudis to flood the market with cheap oil. Lower oil prices devalued the ruble, causing the USSR to go bankrupt, which led to perestroika and Mikhail Gorbachev and the collapse of the Soviet Empire.”

Miles Ahead's picture

Bullshit.  Ronald Reagan was too retarded - as we later found out - to understand any of that.  By the time you finished "flood the market" he would have forgotten what the subject was about with his senile ass.

The Soviet Union collapsed by default, catching the CIA and the West totally by surprised.  It was not sustainable to begin with.  If anything a one-time oil price shock was only the last straw.  The war in Afghanistan went much further to break them.  And that was thanks to Brzezinski.  Reagan was just "there".  In spirit if not in mind.

ack's picture

No. Just because his premise is wrong about USG and its operatives PURPOSELY imploding the USSR with oil policy and other economic pressures -- doesn't mean we backstop "Saint Ronnie". That false-argument isn't worthy of artful neo-bolshie propaganda.   

Volkodav's picture


West like take credit...did nothing positive in real..look where world is today

Russia was already morphing away from decades of Soviet

main of default was organizational

change was happen anyway...certain factions in kgb/other agencies recognized and was planning contigencies, options

Soviet was large and difficult to manage subsidize distant more parts that could not support themself.

Ideas of 1917 never worked, supported only by cruel strickt sufferings

Bad evil ideas dont necessarily or usual die quickly

not even after US/Reagan whoever want was happening already

Soviet was diminishing, certain intelligence formations worked on it...but old was hard to die

Gorby, Yeltsin weaknesses allowed worst depredations

only present Leadership made real change



Liberty2012's picture

There was at least a nudge, some encouragement - "Mr Gorbachev tear down this wall"

Omen IV's picture

the key to me has been the marginal demand which is China - once it was recognized that their demand was coming off big and that Iran Sanctions were not continuing because Russia & China were going to stop the support for the USA to continue its control of Iran - the Saudi's preempted the inevitable decline in price by offering the Chinese big private discounts to fill up their strategic reserve which would have gone to Iran & Russia. China moved way to early to fill the reserve they could have gotten another 20% off the price by waiting - which is weird decision - so there is a story there.

AS all parties Venezuela, Ecuador, Brazil, Mexico, Norway, Iraq, Libya and many others the revenues from oil  - support social stability -  which means the price is meaningless and therefore  return on investment as criteria for marketing decisions.

The Shale producers continue at high levels of production for the similiar reason as all these countries - they have to meet a cash call requirement for bonds and banks - price doesnt matter - they are going to lose their companies and the Fed and banks don't want to face a bailout in an election year - so they are trying to delay the inevitable to 2017 - but the game is coming in too fast

I hope the game blows up so SA blows up and the banks hit the rocks - this may produce change in banking in the USA and the policies in the middle east as wellwhich are game changing

Russia is on the catbird seat: - low debt - and a strong populace that is resolute - great technology - best leadership in the world - and most of all credibility everywhere


Lavrov and Putin - the deal makers with Trump could be huge



Sockeye's picture

I agree something else is at play here. Some massive new reserve somewhere?

Sudden Debt's picture

There is indeed a massive  oil reserve in Iran that hasn't been tapped into because of the political instability.

No big oil company wants to invest 50 billion into an oil field and lose it because of nationalisation.

It's expected to be as large as the Saudi's before they started pumping up theirs.


Why do you think the Saudi's want to sell their oil companies in the market? Because they can still get a trillion out of it because once those fields go online in a few years, the value of their oilfields will fall off a cliff.

Especially since they are running dry.

sun tzu's picture

Oil pre QE = $32

Oil QE = $110

Oil post QE = $29


What's so hard to understand? QE pumped up prices of all commodities, assets, and equities. Now that money is gone and everything will revert to the mean.

Kayman's picture


"oil consumption, whilst soft, hasn't fallen off a cliff."

I personally have not dipped any of the oil storage tanks, but all appearances are that inventories throughout the world have been building for more than a year, including ships.

So supply exceeds demand.  And all the yakkity-yak about what the Chicoms have been doing, is that they filled up their tanks when oil got "cheap" around $50-60/bbl. 

With the exception of heavy oil from the tarsands and Venezuala, most oil can be processed by most refineries.

Ergo- down go prices to the marginal cash costs of production and the amount of available cash held by the individual producer.

opencircle's picture

Saudi oil exports have barely moved comparing 2007 amd 2014/2015. New oil has come from USA, Russia & Canada. European demand dropped and as commodity demand falls - oil usage drops.

Ultimately you can attribute QE to this disaster.