World oil prices could be $5 to $15 a barrel lower than forecast next year if oil-related sanctions against Iran are lifted, the U.S. government’s energy agency said on Tuesday.
In its monthly report, the Energy Information Administration said U.S. oil production growth was slowing even more quickly than it expected a month ago, while demand was higher than earlier forecast. But the agency left its price forecasts unchanged, putting Brent at $59 this year and $75 a barrel next year – with downside risks from Iran’s return.
“A lifting of sanctions against Iran should a comprehensive nuclear agreement be concluded could significantly change the forecast for oil supply, demand, and prices,” EIA Administrator Adam Sieminski said in a statement.
The agency said that Iran is believed to hold at least 30 million barrels of crude in storage, and that the nation could ramp up crude production by at least 700,000 barrels per day (bpd) by the end of 2016. Analysts have also said production would likely recover next year if sanctions are eased.
The comments come on the heels of a framework accord last week to curb Iran’s nuclear program, giving negotiators until June 30 to hammer out a comprehensive agreement. Upon verifying compliance, Iran – once the world’s fifth-largest oil producer – could put supply back into the market.
Meanwhile, the EIA cut its U.S. crude oil production growth forecast for 2015 to 550,000 bpd, versus 700,000 bpd in its March forecast, while the 2016 growth forecast was lowered to 80,000 bpd from 140,000 bpd a month ago.
“U.S. crude oil production is expected to peak this year in the second quarter and then decline in the third quarter, before picking up again toward the end of this year as projected higher crude prices in the second half of 2015 make drilling more profitable,” Sieminski said.
Since June, crude prices have been effectively fallen by more than 50 percent on oversupplied markets and lackluster demand, resulting in falling rig counts and major capital expenditure cuts.