Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Coronavirus: UK Parents Demand ALL Schools OPEN September, 7 Million Children Abandoned by Teachers - 9th Aug 20
Computer GPU Fans Not Spinning Quick FIX - Sticky Fans Solution - 9th Aug 20
Find the Best Speech Converter for You - 9th Aug 20
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Iran Nuclear "Deal" Won't Drive Crude Oil Prices Lower

Commodities / Crude Oil Apr 09, 2015 - 10:47 AM GMT

By: OilPrice_Com

Commodities

Dr. Kent Moors writes: Here at Money Morning we recently had the opportunity to sit down with Dr. Kent Moors, Money Map Press' Global Energy Strategist, for a quick chat about oil.

Kent had taken time out of his frequent world travels – scoping out the latest global energy profit developments – to stop by our HQ in Baltimore.

Here's what he told us about his "ground level" view of the real impact recent geopolitical events in Iran will have on the price of oil.


It's not what most experts think…

Money Morning: Good afternoon, Kent. Let's talk about the quickly changing situation in Iran and its potential influence on oil prices. You wrote recently about the concerns other analysts have expressed about the impact of an Iranian nuclear agreement on already low oil prices.

Kent: The current fear is the tentative agreement with Iran will flood the market with oil and further depress the price. Now, that's what pundits will tell you if they have 30 seconds on air to say something.

Any agreement is unlikely to endure. It became more unlikely after 47 senators essentially tried to sabotage it [in a letter on March 9 saying a future Republican administration would likely spike the deal]. That, largely, was all you needed to render it ineffective. I can tell you that, in that part of the world, that's really all you need. The United States now cannot be trusted to follow through, period.

Money Morning: The senators' letter alone had that impact?

Kent: Yes, and that's exactly why they did it. Iran doesn't know who to trust, so they don't trust anyone. But even with a tentative deal now, and assuming the next administration supports it, it will take a very long time before that oil gets to the market. You've got a situation where the Iranian infrastructure is disastrous and it's going to take a while to rebuild.

Some of that they can't do without significant outside support, and until you eliminate all the sanctions, the outside support's not going to be there. So you're not going to get the technology, you're not going to get what you need to move oil. They have to set up the trading structure; they have to set up the shipping arrangements, and so on.

Until a couple of years ago, for almost ten years, my wife Marina and I ran Thomson Reuters' Russian Petroleum Investor and Caspian Investor.

In the Caspian Investor we were dealing with oil and gas in the Caspian Basin (much of which is in westernmost Kazakhstan, but extends south into Iran) so I ended up writing all their Iranian material.

When we first started introducing Western sanctions, the most damaging were the ones that were applied to insurance companies and shipping outfits. Nobody wants to transport Iranian oil and, even if you do get a tanker that will carry it, nobody is going to insure it. People don't understand that part. They think "Okay, you couldn't sell oil… and now you can." But it's not that simple or quick.

To phase-in all of this process takes time. There's got to be trusted assurances and any agreement will require that certain benchmark indicators are met or sanctions won't be lifted. Or they'll be lifted in stages as you meet each one of these benchmarks. It's going to require very invasive verification inside Iran, which they've never been comfortable with historically.

Money Morning: What impact will Iran's existing oil exchange with China or India have on flattening Western prices?

Kent: The Chinese are very shrewd. They will buy Iranian oil at significant discounts. The only reason that Iran can do a lot of deals with the Chinese is because the Chinese have a balance of trade surplus with Iran.

So the Chinese are essentially purchasing a good deal of that oil in-kind. They don't even have to pay for it. Now, with most transactions – whether Iran likes it or not – they are denominated in dollars, so if you do not have access to hard currency accounts or hard currency bank transfers in the international banking community it's not going to happen. It's another barrier to doing deals.

So, as you can see, there are a lot of other things going on here. The Chinese were usually the largest buyer of Iranian oil. We had certain situations where the Indians, month by month, would be the largest buyers, but it was primarily the Chinese.

And, realistically, their economy collapsed years ago.

Money Morning: Under the weight of the sanctions?

Kent: Foremost because it's a badly managed economy. It only keeps going by baling wire and Band-Aids. It just doesn't function. You've got a series of people who control the bazaars. They make a great deal of money regardless of who's in power.

You also have the ayatollahs on the one hand who don't really want to make political decisions, but on the other hand, they have as their primary responsibilities to maintain the Shiite way of life. So if there are any political decisions, you have a lot of internal conflict… it just doesn't work.

So it's already had that problem and the sanctions just compounded it. I did some back-of-the-envelope calculations recently. If you take the three most vulnerable countries in OPEC, in terms of the price of Brent crude, you have Venezuela, Iran, and Nigeria. I calculated what price Tehran needs to have any semblance of a balanced budget, and it's $145 a barrel – and no sanctions.

And that's not happening right away…

Editor's Note

So even if the verification details are sorted out quickly, the sanctions are lifted, and money floods into Iranian oil infrastructure to bring it back on line as soon as possible, there's little chance that enough oil will flow in the coming years to push prices down even more.

And even if the stars aligned and Iran could get its production numbers up quickly, it would be counterproductive because the potential decline in oil prices would put them even further under the country's $145 bogey.

Source :http://moneymorning.com/2015/04/09/iran-nuclear-deal-wont-drive-oil-down/

Money Morning/The Money Map Report

©2015 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules