Save The Oil And The Wine (Revelation 6:6)

The nuclear deal is mostly about oil

The recent nuclear non-proliferation agreement between Iran and the U.S. has created a firestorm debate in the Middle East and both sides of the Atlantic. While the deal is supposedly all about nuclear power and nuclear bombs, its practical implications are all about oil. But the conclusions we should make about its impact on the energy sector are far from clear. A ratification of the deal would allow Iran to make lucrative long term production and distribution contracts with foreign energy firms. However, freely flowing oil from Iran would add significant new oil supply into the world markets, disrupt U.S. plans to become an energy exporter, and could potentially put further downward pressure on prices.

The U.S. Energy Information Administration (EIA) reports Iran’s proven oil reserves as the fourth largest in the world, at 158 billion barrels, or about 10% of the world’s crude oil reserves. It also has the world’s second largest reserves of natural gas (Oil & Gas Journal, January 2015). But as a result of the series of sanctions laid on Iran by the United States and the United Nations for Iran’s failure to abide by nuclear inspections, which have essentially blockaded the nation, these reserves have done little good for the Iranian economy or the theocratic Muslim government that holds the country in its tight grip.

The IMF estimates that Iran’s oil and natural gas export revenue had been $118 billion as recently as 2011/12. But by 2012/2013 revenues fell by 47 percent to $63 billion. Revenues declined another 10 percent in 2013/14 to $56 billion (Islamic Republic of Iran, Country Report, April 14, 2014). By May 2015, Iran’s daily oil production had fallen from 4 million barrels in 2008 to just over 2.8 million barrels.

It goes without saying that the removal of the sanctions regime will allow Iran to resume exports at levels seen in the past. And if Iran is true to its word, and that its nuclear program is indeed focused on the development of nuclear power plants, then it is likely that its domestic demand for fossil fuels will fall, thereby allowing for even greater exports.

The first issue regarding Iran’s new oil flow is how easily will it be able to reestablish its former customer links and sell its oil, regardless of increased production. Having destabilized the Middle East by killing Saddam Hussein, the U.S. may wish now to leave the areas’ nations alone to sort out the resulting mess. Into this void we can be sure that the Chinese and Russians will stride forcefully and deliberately.’

Even if Iran is successful in regaining former customers, and selling down its inventory, how quickly can its production be increased? The Iranian oil infrastructure has been neglected for years and Iran needs to rebuild it desperately. Fortunately, Western expertise in energy development is by far the most advanced, which will give Western interests a leg up on Chinese and Russian rivals. But Chinese cash and strategic support may prove decisive.

Reuters reports that, in the opinion of 25 economists and oil analysts, Iran could be able to increase its oil production by up to 500,000 barrels a day this year and reach 750,000 a day by mid-2016. This will add to a current global oversupply of some 2.6 million barrels a day.

Meanwhile, as the price of oil remains relatively depressed, production wells in the U.S. and other producing nations, planned and established when oil prices were much higher, are drifting off stream. Finally, there is increasing evidence that recession may be felt internationally, reducing at least the rate of growth of oil demand if not the absolute level of demand in some countries.

Today’s oil market faces a global supply overhang and price weakness. Iran’s new oil production and exportation is not likely to come on line for at least a year or two, provided the treaty is ratified. But when that oil does start to flow, the new supply could add to downward price pressures. However, the amounts are unlikely to greatly affect the totality of the global marketplace and by that time whatever inflationary effects there may be of continued monetary expansion in America and Europe should act as a stronger force pulling prices upward.

In total then, the return of Iran to the global energy market should have a beneficial effect on the global economy, both in pushing down prices and providing lucrative development work for oil companies around the world. However, the economic aspects of the deal are largely insignificant in comparison to the geopolitical ramifications.

President Obama’s nuclear arms deal leaves open to debate whether Iran will become a nuclear power within the next decade, if not earlier. Unleashing a nuclear arms race in a highly unstable area of the world would render oil supplies sourced from there considerably less secure and unattractive, possibly even at lower prices, to consumer nations, including the 500 million strong EU.

The deal will also threaten the longstanding alliance between the United States and Saudi Arabia. The implicit arrangement between the two countries has always been that the Saudis would direct the lion’s share of its oil exports to the United States in exchange for American support of regional Saudi security interests. Shiite dominated Iran has always been one of Sunni-led Saudi Arabia’s top concerns. If the U.S. and Iran drift closer together, Saudi Arabia will surely seek other partners who are more supportive of its interests.

No one knows what such a Middle East will look like. But given the volatility of the region, change is unlikely to be pretty.

Save The Oil And The Wine (Revelation 6:6)

How an Iran nuclear deal would impact oil prices

By Nick Cunningham,
June 27, 2015

A deal stopping Iran’s nuclear program and lifting Western sanctions on the country would immediately push down oil prices, writes Nick Cunningham. The country has 40 million barrels of oil in storage and could ramp up production quickly.

Oil prices have leveled off in recent weeks, but with the negotiations over Iran’s nuclear program bumping up against a deadline, that could change.

After crashing last year and then hitting several peaks and valleys, oil prices have traded within a relatively narrow range, with WTI bouncing around a bit above and below the $60 per barrel mark, and Brent staying near $64 per barrel. Of course, day-to-day there has been volatility as usual, but oil prices have been stable (relatively speaking) since the end of April. Even the OPEC meeting came and went without so much as a shrug from the oil markets.

But the deadline for the Iran negotiations – ostensibly set for June 30 – is only a week away and the outcome could have broad ramifications for the oil market, both in the immediate aftermath and over the long-term.

If a deal can be agreed to by both sides, Iran could bring a wave of oil production online. Western sanctions have knocked 1.2 million barrels per day offline since 2012. Although estimates vary, Iran might be able to bring 400,000 barrels per day online within a few months, perhaps as much as 700,000 barrels per day by the end of the year, growing to well over 1 million barrels per day sometime in 2016.

Also, Iran has somewhere around 40 million barrels of oil sitting in storage, a lot of which could essentially hit the market as soon as sanctions are lifted.

If news breaks that a deal is in hand, oil prices will sink on the expectation of this future volume, potentially dropping by $5 to $10 per barrel. And as Iran actually does ramp up output over time, and the rest of OPEC opts against cutting back to make room, global supplies will increase. That will keep a lid on future price gains and extend the current period of soft pricing.

Of course, supply and demand will have to balance out over time, and more Iranian crude will force a larger adjustment from U.S. shale, so U.S. oil production could see a deeper contraction.

Save The Iranian Oil And The Wine (Rev 6:6)

How Would The Iran Nuclear Deal Impact Oil Prices?

Trefis Team, Contributor

Iran was the first Middle East nation to report an oil discovery. In 1908, the Anglo-Persian Oil Company, known as BP today, struck first oil in the country. Since then, the country’s crude oil industry has seen many ups and downs, including the nationalization of oil fields in the 1950s and the formation of OPEC in the 1970s. Today, it holds the second-largest proved crude oil reserves base in the Middle East. However, the country’s ability to market these reserves internationally has been severely restricted since 2012 because of the tighter sanctions imposed by the European Union and the U.S. to curtail its nuclear program. Iran’s crude oil exports, which contribute around 80% to its total exports income, and almost 50-60% of all government revenue, have almost halved in volume since 2011, and the recent slump in oil prices means that the decline in revenue could be much worse. The chart below shows how Iran’s crude oil production has trended over the past few years.

However, things could start to look up for ancient Persia if it is able to strike a deal with the U.S. and its negotiating partners that include Russia, China, Britain, France, and Germany. Negotiations for the deal have been ongoing for over 18 months now and a framework agreement was signed in April this year. The parties involved are looking at a June 30 deadline to work out the details including the pace and the manner in which sanctions over Iran would be lifted, and the level of access that would be given to the Nuclear watchdog, the International Atomic Energy Agency (IAEA), to monitor the country’s nuclear facilities and scrutinize the broader program. Based on the final form of the deal, it could have huge implications for both Iran’s economy, as well as the global crude oil market. Let’s focus on the latter for now.

The global crude oil market is already oversupplied currently, which is also evident from the recent weakness in benchmark prices. The front-month Brent crude oil futures contract on the ICE has fallen by more than 45% over the past 12 months. A lot of this could be attributed to a combination of the slowest growth in demand for oil products last year, since the 2008-2009 recession, and a robust growth in supply from Non-OPEC sources, primarily the U.S. In the U.S., increased horizontal drilling of relatively impervious shale rocks has led to a significant jump in crude oil production over the last few years. According to the latest statistical review of world energy by BP, the country’s oil production increased by almost 1.6 million barrels per day or 15.9% year-on-year in 2014. This made up for more than 75% of the total net growth in global crude oil production last year. Global demand on the other hand, increased by just around 0.7 million barrels per day. Although the slump in oil prices has resulted in a significant decline in drilling activity in the U.S. over the past several months, crude oil production from the country is still expected to increase by around 0.6 million barrels per day this year. And despite weaker prices, the OPEC, led by Saudi Arabia, has also been adding supplies to the market, to increase its market share. All of this additional supply means that global crude oil prices are not expected to recover significantly from current levels anytime soon, despite a much faster growth in global demand, expected at 1.5 million barrels per day this year.

In such a scenario, the Iran nuclear deal could mean even more oil in the market, further widening the gap between the demand and supply. In terms of how much and how soon, based on the market reports regarding the country’s floating oil storage capacity, we believe that Iran could introduce as much as 30 million barrels of crude oil into the market almost immediately as soon as the sanctions are lifted. This will not have a sustained impact on benchmark crude oil prices, as it represents just about one-third of the daily consumption of oil products and other liquid fuels globally. However, the impact of the actual increase in Iranian crude oil production could be far more significant. We expect the country to easily be able to ramp up its production by around 1 million barrels per day over a period of 8-12 months after the sanctions are lifted, as it would be just about starting up shut down wells. To give some perspective, that is more than one-fourth the daily consumption of oil products in India, an emerging market that has been a key customer of Iran’s crude oil in the past. Since the Iranian exports will be entering an already oversupplied market, it will have to offer some discounts to buyers in order to lure them into long-term contracts. This will further increase the competition for market share in the global crude oil market and might even lead to Saudi Arabia following an even more aggressive approach on pricing, as it is not in favor of the U.S. and other world powers to ease sanctions on Iran. We have therefore reduced our short to medium term price estimate for crude oil on growing signs of a final deal between Iran and the world powers by the end of this year. We currently forecast spot crude oil prices (Brent) to average around $63 per barrel this year and increase gradually to around $93 per barrel by 2021.

Ishmael Hates Esau More Than Jacob (Genesis 28)


Saudis consider Iran – not Israel – their top enemy, study finds

By The Associated Press
Published 01:49 05.06.15

An Israeli college has quietly conducted an opinion poll in Saudi Arabia, concluding that the Saudi public is far more concerned about the threats of Iran and the Islamic State group than Israel, and that the vast majority of Saudis support a decade-old peace offer to the Jewish state.

The survey conducted by the Interdisciplinary Center in Herzliya provides Israelis with a rare glimpse inside Saudi Arabia and may change Israeli perceptions about the desert kingdom. The two countries are longtime foes with no diplomatic relations.

The poll found that 53 percent of Saudis named Iran as their main adversary, while 22 percent said it is the Islamic State group and only 18 percent said Israel. The poll, conducted in conjunction with the University of Wisconsin-Milwaukee, surveyed 506 Saudis over the phone and had a margin of error of 5 percentage points. It was carried out over the past two weeks, starting in late May.

The poll also showed that a majority of Saudis think their country should seek nuclear weapons if Iran acquires an atomic bomb. A whopping 85 percent also support the Saudi-led Arab Peace Initiative, which calls for peace with Israel in return for a full Israeli withdrawal to its pre-1967 borders.

The results indicate significant common ground between Saudi Arabia and Israel, whose prime minister, Benjamin Netanyahu, has been outspoken in his criticism of an emerging nuclear deal between Iran and global powers. Netanyahu, who believes Iran is pursuing a nuclear weapon, says the deal will leave much of Iran’s nuclear infrastructure intact. He has also claimed that unnamed Arab countries, presumably Saudi Arabia and other Sunni Gulf countries, share his concerns. Iran denies seeking nuclear weapons, insisting its atomic program is for purely peaceful purposes.

“What we think here in Israel about the Saudis is not exactly what they are,” said Alex Mintz, who heads the IDC’s Institute for Policy and Strategy and oversaw the survey. “There is a great identity of interests and threats and agendas … some would even like to join forces with Israel.”

The questioners told respondents that they worked for the IDC, though they did not say they or the school were Israeli. Mintz said few people questioned the source of the survey, and those who did raise questions did not make the connection to Israel. He said there were no unpleasant exchanges.

The institute, which last year carried out similar surveys of Iranians and Gazans, said it relied on information gathered from the Saudi Arabian directory and bureau of statistics to proportionally sample 13 regions of the country based on their populations. It said Arabic-speaking Israelis called a mixture of mobile phones and landlines and encountered a 22 percent response rate.

Mintz said the full results of the poll would be revealed next week at the IDC’s 15th annual “Herzliya Conference,” a gathering of Israel’s military and political elite, but offered The Associated Press the data in advance.

Although Israel and Saudi Arabia have no official contact they have grown closer in recent years, mostly due to their common concern over Iran. A quarter of the poll’s respondents said Israel and Saudi Arabia should join forces to fight Iran together.

Saudi Arabia was the driving force behind the 2002 Arab Peace Initiative, offering Israel a comprehensive peace with dozens of Arab and Muslim countries in exchange for a withdrawal from all territories captured in the 1967 Mideast war and the establishment of an independent Palestinian state. Netanyahu has said the initiative might be a starting point for discussions but that it is unacceptable as a take-it-or-leave-it offer.

Mintz said he hoped the Israeli government would seize on the new information to adjust its traditional policies.

“We assume that we know what people in Iran, Gaza and Saudi Arabia think, but guessing and actual empirical evidence is two different things. For example, nobody that I talked to thought that Saudis would say by a margin of 3-to-1 that Iran scared them more than Israel, nobody predicted that,” he said.

“This is really a Sunni-Shiite divide and it has nothing to do with Israel and their focus has shifted. There is a commonality of interests between Saudi Arabia and Israel right now that the Israeli government should take advantage of and capitalize because it is unique in the history of the two states,” he said.

ISIS Destabilizes Iraqi Oil (Rev 6:6)


ISIS is making the biggest threat to oil prices even worse

The Telegraph
MAY 30, 2015, 10:30 AM 25,153 22

Thick black smoke rising from the could be seen as a dirty smudge on the horizon as far away as Baghdad after fighters from the Islamic State of Iraq and the Levant (Isil) set fire to the enormous processing plant just over 100 miles north of the capital last week.

The decision to torch the refinery, which once produced around a third of Iraq’s domestic fuel supplies, was made as the insurgents prepared to pull out of Baiji, which they captured last June in a victory that sent shock waves across world oil markets.

A year on from the start of the siege and a shaky alliance of the Middle East’s major Arab powers, with the limited support of the reluctant US government, has failed to contain the expansion of Isil.
The problem for the US and the rest of the industrialised world is that the Middle East controls 60pc of proven oil reserves and with it the keys to the global economy. Should Isil capture a major oil field in Iraq, or overwhelming the government, the consequences for energy markets and the financial system would be potentially catastrophic.

Many of the countries most threatened by the onslaught of the extremist group, which has grown out of the chaos of Syria but was initially dismissed as a wider threat to regional stability, will gather at the end of this week in Vienna for the meetings of the Organisation of the Petroleum Exporting Countries (Opec) .

Iraq, Saudi Arabia, the Gulf states and Iraq – which together account for two thirds of the cartel’s production – are all now affected by the inexorable march of the Isil jihadists but appear powerless to prevent it due to the widening sectarian schism between the Sunni and Shia Muslims across the region in the wake of the Arab spring uprisings five years ago.

Oil ministers gathering to decide on production levels at Opec’s secretariat building in Vienna will normally stay clear of wider geopolitical issues during their deliberations in the Austrian capital. However, the threat posed by Isil and its brutal brand of Islamist extremism is likely to force politics onto the agenda. It certainly can no longer be ignored.

According to Daniel Yergin, the energy expert and vice-chairman of IHS, the business information provider, the biggest threat to oil prices is the political chaos that threatens to engulf the Middle East, combined with the West’s reluctance to intervene.

Speaking to The Sunday Telegraph, Mr Yergin argued that the price of a barrel of oil could skyrocket to levels above $100 per barrel if Isil is allowed to press deeper into Iraq, the second-largest producer in the cartel after Saudi Arabia.

“Isil presents a whole new reality for the region, which just isn’t reflected in the oil market at the moment,” said Mr Yergin. “It’s an increasingly grave situation for most of Opec and the Middle East. At some point the security issues will start to come back into the price of oil.”

Up to this point, oil markets have shrugged off the risk of a major supply disruption caused by the worsening security situation. Traders have remained focused on the market fundamentals that almost 2m barrels per day (bpd) of excess oil capacity will be more than enough to absorb any supply-driven shock. A rally in the price of Brent crude – a global benchmark – which began in January and saw prices push close to $70 per barrel has lost momentum amid signs that higher prices could revive drilling in the US.

Just over six months ago when Opec’s 12 oil ministers last met in Vienna the cartel decided to continue pumping oil at a level of around 30m bpd, which effectively fired the first shots in an oil price war against shale drillers in North America, and Russia.

After almost a decade of oil prices ticking along at above $100 per barrel during which the group ignored the shale revolution taking place in the US, Opec decided to act last November. Under massive pressure from its most powerful member Saudi Arabia, the cartel allowed market forces to drag down oil prices. Initially, the strategy worked.

Within a month, oil prices had fallen to multi-year lows below $50 per barrel, sharply lower than the $115 year-high achieved last June when concern over the civil war in Syria caused a spike in prices. The sudden downturn in prices immediately had the desired effect on oil producers outside the Opec cartel.

In the US, oil companies began to shut down drilling rigs at a record rate. According to Baker Hughes, rig numbers have fallen for 24 straight weeks to 659 rigs as of last week compared with a record 1,609 rigs operating last October. In high-cost production areas such as the North Sea the impact of Opec’s decision to allow oil prices to fall naturally has shaken the industry to its core.

In his last budget of the Coalition government, George Osborne was forced to offer North Sea oil companies tax breaks to soften the blow of lower prices, while hundreds of jobs have been lost in Aberdeen.

“Opec has embarked on a strategy of leaving the oil price to the market and is willing it seems to allow the economics of supply and demand to take effect,” said Mr Yergin. “What is so startling is that geopolitics has been stripped out of the oil price for now but sooner or later it will be factored back in.”

Oil prices have gained roughly 30pc since the beginning of the year to trade at around $65 per barrel, with major banks and trading houses. However, traders have so far ignored the risks posed by Isil now to oil supplies, or the danger of a major terrorist attack on oil facilities in Saudi Arabia. Goldman Sachs has instead forecast that prices could again fall to $45 per barrel by October as US shale drilling picks up.

According to Mr Yergin this analysis ignores the dire political situation in the Middle East and the US government’s reluctance to acknowledge the danger to the wider global economy. Many of these analysts have focused on the continuing glut of new oil supplies from Saudi Arabia and Iraq. Both nations appear to be fighting for greater market share by filling the gap that is opening up in the oil market as higher cost production is shut down.

Swing producer Saudi Arabia is now pumping more than 10.3m bpd of crude, a record for the kingdom which maintains the capacity to produce up to 12m bpd if required. Despite the encroachment of Isil, which now controls the country’s largest province, Iraq has also dramatically increased its oil production over the past six months.

Iraq is poised to lift its exports by as much as 800,000 bpd to around 3.75m bpd next month as the government in Baghdad desperately tries to increase its revenues, which have been crippled by falling prices. In either case, a major terrorist attack on oil export facilities would shatter confidence and the notion that $100 oil is a thing of the past.

Although most of Iraq’s major oil fields are located in the south of the country, which are Shia Muslim heartlands, the failure of the Iraqi army to deal with the threat of Isil is a sign of their vulnerability to isolated attacks. Meanwhile, Saudi Arabia is in a virtual state of lockdown after the bombing by Isil militants of a Shia mosque in the oil-rich Eastern Province. The brutal attack, which appeared designed to provoke sectarian unrest in the kingdom, killed 21 worshippers and injured 80 others.

Saudi authorities have stepped up security at the country’s vast oil installations. The kingdom, which accounts for 12pc of global oil supply, is effectively under siege. To the north, jihadists threaten its borders from Iraq and Syria. In the south it launches air strikes against Iranian backed Houthi rebels in Yemen but has so far failed to defeat the tribes, which have continued to make territorial gains.

To add to the problems facing Saudi Arabia’s new ruler, King Salman bin Abdulaziz al-Saud, his kingdom is also facing insurgency from the so-called Al Qaeda in the Arabian Peninsula terrorist group which is intent on destabilising the regime.

Against this cataclysmic backdrop of bombs falling in Sana’a and with Isil literally at the gates of the major Iraqi city of Ramadi, many US energy and security experts were shocked to hear President Barack Obama ignore the danger in a recent keynote speech in which he pinpointed global warming as an equally big risk for Americans.

“Climate change constitutes a serious threat to global security, an immediate risk to our national security,” warned Mr Obama in a speech that many have criticised as symptomatic of the administration’s desire to disengage from the region which still provides a significant share of its oil.

Despite the growing focus on climate change and the campaign to limit fossil fuel production, Isil will be a bigger concern for the majority of oil ministers around Opec’s table next week.

The Obama administration’s reluctance to intervene marks the end of a US policy to protect the region’s oil which has remained in existence since President Franklin D Roosevelt first met with modern day Saudi Arabia’s founder King Abdulaziz in 1945. It was this commitment that drew America into the first Gulf War in 1991 and again in 2003 when it decided to bring down the curtain on Saddam Hussein’s regime.

However, Mr Obama’s lack of a viable alternative foreign policy for the region has put world energy markets at risk.

“How US national and foreign policy will integrate itself again with the region is unclear,” said Mr Yergin.

Washington’s determination to pursue a nuclear deal with Iran has arguably destabilised the region by placing Riyadh and Tehran on a collision course . Saudis are dismayed that Iranian military advisers are aiding the assault to recapture Ramadi, a city in Iraq’s Anbar Province which US forces fought so hard to secure 10 years ago.

Although Opec makes it a rule to stay away from politics, tensions between its 12 members are never far from the surface when they gather in Vienna. The organisation is one of the only remaining inter-governmental settings outside the United Nations where senior Saudi and Iranian officials can sit down together, which makes next week’s gathering potential dynamite.

Iran opposed Saudi Arabia last November when the kingdom’s oil minister, Ali al-Naimi, insisted that the group should stand on the side lines and allow market forces to drive down the oil price in order to render high-cost oil such as US shale unprofitable. Years of sanctions have crippled Iran’s economy and eroded its oil industry, which has added to pressure on the regime to agree to a nuclear deal with America under any terms. However, Iran needs oil prices above $100 per barrel in order to support its Shia Muslim allies, including the Houthis fighting Saudi Arabia in Yemen, in the wider Middle East.

Insiders say Saudi Arabia will get its way once again in Vienna and expect Opec to agree to “roll over” their production settings. With vast foreign currency reserves Riyadh and its Arab allies in the Persian Gulf can weather the storm better than Iran, while the continuation of lower oil prices will limit Tehran’s ability to support Saudi’s enemies in Yemen.

The danger is that Isil has other plans.

Save the Oil: Why the Iran Deal Won’t Happen (Rev 6:6)

Why Does Russia Fear Iran’s Nuclear Deal?

Posted By: Polina TikhonovaPosted date: May 19, 2015 09:25:17 AM

The framework deal on Iran’s nuclear program is far from being realized and has numerous hiccups and enemies attached to it. However, most of media and political experts discuss it as a sealed deal. They even talk about its consequences. Most of them are talking about Saudi Arabia and Israel’s fate. And, of course, there are some analysts who have concerns over the relations between Iran and Russia.

Russia would like to keep Iran under sanctions

Most of the experts believe that the deal itself is unfavorable for Russia, and that Moscow would like to keep Iran under sanctions. Undoubtedly, Russia is interested in keeping the current status quo for as long as it’s possible, which had a lot of limitations imposed on Iran and Moscow was the only partner for Tehran.

However, it must be pointed out that such status quo was extremely volatile and the situation could spiral to either a direct war between the US and Iran or a war in Syria. And no matter how the war would have ended, it would destabilize the Middle East and the global economy as a whole. That’s why the framework deal is the least evil of all for Russia.

It must be understood, however, that the Iran framework deal doesn’t mean a Russia’s sudden rapprochement with Iran from one side, and with the West from the other. As for the US, it’s difficult to predict any sudden renewal of economic relations as they have been deteriorated ever since the Iranian revolution.

And the two countries can’t really establish relations anew as it must be first approved by the Congress, while the lifting of economic sanctions against Iran is not even in the cards now. The US President Barack Obama will consider himself lucky if he can at least convince the Republican Congress to not halt the nuclear deal.

The Europeans are going to attempt entering the Iranian market and drive out the Russian as well as Chinese companies. However, the Iran’s interest of having close cooperation with Europe should not be exaggerated.

The majority of Iranian establishment backs the talks efforts only because it wants the economic sanctions to be lifted. The Iranian conservators are not interested in building close political-economic relations with the West. They believe that the more Iran opens up to the Western world, the more chances for the country to have a ‘color revolution’, which would bring down the current regime in place.

Iran’s entering of external markets would lower the prices of crude oil

According to other political experts, another Russia’s fear is that lifting the sanctions against Iran would result in entering of external markets by the Iranian fossil fuels, which therefore would lower their prices.

And the experts are partially right – well, at least when it comes to crude oil – the Iranians have promised to dramatically increase the export of crude oil right after the sanctions are lifted.

As of now, Iran exports about 1 million barrels of oil a day and after the sanctions are lifted, it plans to double the number and even come back to the pre-sanction number of exporting 2.5 million barrels of oil a day.

According Mohsen Qamsari, the director for international affairs of the National Iranian Oil Company (NIOC), Iran can ship almost half of the supplies of oil that it provided to the European market before.

“The contracts will be clinched on the basis of spot deals until the European clients finish their existing annual import contracts and are ready for new contracts,” Qamsari said.

However, the only possible hiccup for the crude oil export might be a gradual, not the ‘full and at once’, lifting of the sanctions as well as Iran’s unwillingness to sell oil at such a low price.

Iran might try destabilizing the situation in the Middle East

As a matter of fact, as Saudi Arabia privatized the Iranian quota, Iran might try to take it back either through the process of talks or through destabilizing the situation in Yemen as well as Saudi Arabia.

As for the export of the Iranian oil to EU through the Nabucco-West pipeline, which is an ‘enemy’ to Gazprom, experts claim that it would become possible only in a decade or so.

Iran must build a pipeline network from its South deposits to the Turkish border, normalize its relations with Turkey, improve energy efficiency of its production sector in order to not consumer so much gas. However, a lot might change within the next 10 years, especially given the fact that this is the Middle East we are talking about.

And finally, another Russia’s fear is that after Iran is liberated from the sanctions, Russia is going to lose a significant share of its influence in the Middle East. Until recently, it really seemed so: Iran was the main partner of Russia in the region, and the inevitable worsening of the relations between Moscow and Tehran after Russia stopped being a single-source partner, would decrease Russia’s presence in the Middle East.

The number of nuclear clients of Russia is also decreasing by the second. Ukraine, which has been the top client of the Russia’s nuclear sector, is posed to develop a cooperation with the US companies in order to upgrade its own nuclear infrastructure.

However, during the last couple of years, Russian authorities have managed to find alternative partners largely thanks to its unhinged position on Syria’s matters. Russia has been reached out by countries – such as Egypt – that are looking to diversify their relations with the US. Furthermore, Russia has managed to improve its diplomatic relations with Saudi Arabia and the Persian Gulf countries.

So now, Iran is particularly not interested in ending relations with Russia and letting it freely operate in the region.


Iran And Pakistani Horns Will Align (Daniel 8:8)

Irani workers stand near as a security helicopter lands near the pipeline during a groundbreaking ceremony to mark the inauguration of the Iran-Pakistan gas pipeline, in the city of Chahbahar in southeastern Iran March 11, 2013. Ahmadinejad and Zardari marked the start of Pakistani construction on the much-delayed gas pipeline on Monday, Iranian media reported, despite U.S. pressure on Islamabad to back out of the project. REUTERS/Mian Khursheed    (IRAN - Tags: POLITICS ENERGY) - RTR3EUW9

Irani workers stand near as a security helicopter lands near the pipeline during a groundbreaking ceremony to mark the inauguration of the Iran-Pakistan gas pipeline, in the city of Chahbahar in southeastern Iran March 11, 2013. Ahmadinejad and Zardari marked the start of Pakistani construction on the much-delayed gas pipeline on Monday, Iranian media reported, despite U.S. pressure on Islamabad to back out of the project. REUTERS/Mian Khursheed (IRAN – Tags: POLITICS ENERGY) – RTR3EUW9

Iran-Pakistan pipeline could finally become reality

Author Mohammad Ali Shabani
Posted May 14, 2015

Of the numerous obstacles to the project’s finalization, US opposition in particular has weighed heavily.

Washington has long lobbied for the Turkmenistan-Afghanistan-Pakistan-India pipeline while discouraging the IP pipeline, promoting Turkmen over Iranian natural gas. In recent years, toughened Western sanctions on Iran have made the project even more cumbersome.

Punitive measures targeting involvement in Iran’s energy industry, along with financial and banking restrictions, have hit funding for Pakistan’s section of the pipeline, and complicated discussions on payment mechanisms. Compounded by Islamabad’s dire economic condition, Iran has ended up building its section from its southern city of Asalouyeh to its border with Pakistan. Islamabad is contractually obliged to pay steep fines, beginning in the winter of 2014, when gas deliveries were supposed to commence. However, payment of these fines, triggered by Pakistan’s failure to build and operate its section of the IP pipeline, has not materialized — with Iranian consent.

Apart from targeting the IP pipeline, Western sanctions have also cut the liquefied natural gas (LNG) route for Iranian exports. Since Western firms hold a monopoly on the technology needed for crucial aspects of LNG infrastructure, sanctions have halted Iran’s ambitious LNG projects. Meanwhile, energy-starved Pakistan earlier this spring bought its first-ever LNG shipment — from Qatar. Ironically, this Qatari natural gas originates from the vast North Dome field, which is shared with Iran, where it’s called South Pars, and from which the IP pipeline is slated to be fed.

US pressure has also played a role in thwarting the pipeline’s envisaged extension to India. Pricing, security concerns and troublesome Indian-Pakistani dynamics were important factors in preventing New Delhi’s participation. However, US pressure on India to abstain should not be underestimated. While largely driven by separate dynamics, it is of note that the 2008 US-India Civil Nuclear Agreement preceded India’s subsequent decision to pull out of the pipeline’s extension.

The heightened prospect of the project’s near-term finalization springs from two recent developments: the breakthrough in the nuclear negotiations between Iran and the world powers, and China’s move to provide a massive $46 billion investment package to Pakistan.

The US State Department’s Special Envoy for Energy Amos Hochstein stated April 29 that “as long as the [nuclear] agreement [with Iran] is not reached, sanctions are in place and therefore, Pakistan should hold off undertaking any project such as the IP pipeline until the removal of sanctions.” However, considering the likelihood of a final nuclear deal come June 30 — and a likely front-loaded deal at that — Tehran and Islamabad have reason to be upbeat. Moreover, as part of the Chinese investment package, up to $2 billion has been earmarked for a pipeline running from Pakistan’s southern port of Gwadar to Nawab Shah district. Mindful of the planned LNG terminal in Gwadar, which would allow such imports from countries such as Qatar, this arrangement steers China and Pakistan clear of US objections while putting Islamabad in a position to get the IP pipeline started by building a short stretch of pipeline from Gwadar to the nearby Iranian border.

The greater economic and political repercussions of the IP pipeline are clear and widely debated. For Pakistan, the IP pipeline is projected to have the capacity to entirely cover the current shortfall of 4,500 MW of electricity generation. For Iran, new markets to the east will be opened, not only expanding but also diversifying energy export revenues. Iranian Oil Minister Bijan Namdar Zangeneh last week emphasized that Iran’s main focus for gas exports is Asia rather than Europe. Moreover, both China and Iran have stated an interest in extending the pipeline to Chinese territory.

However, perhaps overlooked is the impact that boosted Iranian-Chinese trade and interaction with Pakistan will have on power politics in the Middle East.

If Iran maneuvers correctly, the IP pipeline has the capacity to bring it both petrodollars and eastward political clout. For Pakistan, the pipeline — amid the backdrop of the increasing weight of its long-standing strategic cooperation with China — will not only diversify energy sources, but provide previously unthinkable political options. The latter is already happening. The combined outcome of the recent visit of a senior Iranian delegation to Pakistan and China’s subsequent unveiling of its massive investment package is a case in point: Islamabad dared to refuse Saudi Arabia’s request for ground troops and other military involvement in Yemen.

While the Chinese visit had been planned long beforehand, reports say “the Pakistani interlocutors also raised with the Chinese president the possible fallout of ‘defying’ the Saudi demand,” and that “President Xi assured Pakistan that his country would stand behind Islamabad in the event of unraveling of its ties with the Arab world.” Saudi Arabia and other members of the Gulf Cooperation Council lashed out at Pakistan over its refusal to join their Yemen offensive.

Long portrayed as Riyadh’s “Plan B” in case of an Iranian nuclear bomb, Pakistan’s defiance on Yemen serves to further question Saudi Arabia’s standing in the region. Recently, senior Saudi officials have asserted that they will seek whatever nuclear capabilities Iran will maintain under a nuclear deal. However, since Saudi Arabia has no domestic nuclear industry, and the Nuclear Suppliers Group has banned the export of many necessary components to the region, only countries such as Pakistan and North Korea are potential enablers of stated Saudi nuclear ambitions. Apart from the grander, more obvious impediments to questionable Saudi-Pakistani nuclear dealings, the dynamics witnessed in relation to the Yemen debacle makes the latter scenario ever more unlikely.

Rather than being anxious about merely the nuclear deal with Iran, Saudi Arabia certainly has reasons to worry about the repercussions of an end to Western efforts to isolate Iran.

Read more:

Save The Oil, Shiite Oil (Revelation 6:6)

Here’s why Iran and Iraq should worry OPEC

Stephen Sedgwick | @steve_sedgwick
Tuesday, 12 May 2015 | 6:01 AM ET

Oil Iraq OPEC

Atef Hassan | Reuters

Caveat emptor! The big Organization of Petroleum Exporting Countries (OPEC) summer pow-wow is only 24 days away now and ceteris paribus we should see a continuation of the status quo. Right that’s enough Latin, the only languages that really count at the meeting will be Arabic, Farsi, Kurdish and money, namely petrodollars.

As far as I can see, this one is about how Saudi Arabia, Iran and Iraq solve a growing problem of how you cap OPEC production – and thereby falling prices – at a time when Baghdad and Tehran are desperate to up output.

Despite the rally from the mid-$40 region, OPEC could be hundreds of billions light in terms of revenues this year causing some to once again trot out the old, tired and inaccurate line that OPEC is losing its importance in world energy supply.

I even read a report under the headline ‘OPEC going broke…’ Really?

Well no-one is doubting that the loose alliance is fractured, sometimes dysfunctional and limited in its adherence to stated production levels but going broke and irrelevant? Dream on.

What is clear though is that some countries desperately need the petro-dollars that would come from increased production. Iran and Iraq are not only near the top of that list but also have the capacity to ratchet up their levels, albeit with the caveat in Iran’s case of completing nuclear talks.

Bernstein Research has just put out a briefing on the importance of Iraqi and Iranian production ahead of the OPEC meeting on 5th June and amid the reams of statistics I pulled out a few. And if you think it’s only Saudi Arabia that matters then look again at these numbers on Iran and Iraq:-

Iran has 1 percent of global population but an estimated 157 billion barrels of proven crude oil reserves.

The Iranian number equates to 9.5 percent of world total and is fourth largest amongst all countries after Venezuela, Saudi Arabia and Canada.

Iran also has the second-largest proven gas reserves at 1,193 trillion cubic feet – 17 percent of the world’s resources and 35 percent of OPEC’s.

And the Iraqi numbers are not to be sniffed at either:-

Iraq comes close with 144 billion barrels of proved crude oil reserves.

The Iraqi figure equates to 9 percent of the world total and is fifth largest globally.

Iraq is the second-largest OPEC producer currently, producing 3.4 million barrels per day, equating to 4.3 percent of the world total.

To put this in context, Bernstein’s report says there are roughly 1,6 trillion barrels of proven oil reserves in the world.

So Iran and Iraq are potentially the major players who could upset not only OPEC equilibrium with their challenge to number one producer Saudi but have the ability to put the skids under the big rally in oil off the March lows.

Follow Steve on Twitter: @steve_sedgwick

The Nuclear Race Has Already Threatened US Oil (Rev 6:6)

This Nuclear Arms Race Could Further Threaten the U.S. Oil Industry

While the world watches as Iran and the U.S., along with five other world powers — the so-called “P5+1″ — negotiate a deal regarding the country’s nuclear ambitions, fellow Middle-East power Saudi Arabia isn’t sitting still. The Saudis have actually been working on developing energy from alternatives to oil since former King Abdullah established a center for atomic and alternative energy in 2010.

Raising the ante, the country recently signed a nuclear cooperation agreement with South Korea, even as rival Iran inches closer to an agreement to allow it to continue its own nuclear ambitions. A recent Wall Street Journal article even brought up the potential risk of Saudi Arabia using its partnership with Pakistan to have access to nuclear weapons as a response to the threat of a nuclear Iran.

These are real concerns; but nuclear proliferation has been a world risk for 70 years now, since the U.S. developed the first hydrogen bomb. I don’t want to downplay that risk; however, there’s another side to this story that shouldn’t be ignored. It may have very real economic consequences for the American oil industry, which is not an insignificant part of the U.S. economy, and has been one of the brightest spots in our jobs recovery.

Oil: U.S production has replaced Iranian market share 

In 2011, Iran exported 2.5 million barrels of oil per day. By 2013, exports had plummeted to 1.1 mmb/d following sanctions based on the country’s continued attempts to develop nuclear technology. Iran exported roughly 1.4 mmb/d in 2014.

At the same time, American shale production was cranking into high gear. In 2013, U.S. oil production was 7.45 mmb/d, and increased an astonishing 1.2 mmb/d last year. Considering that oil is a largely global commodity, it’s not much of a stretch to view U.S. production growth as essentially offsetting the cuts to Iranian output in recent years.

Of course, oil prices have declined more than 50% since last June, largely because global production has grown faster than demand:
Brent Crude Oil Spot Price Chart

That’s happened without more than 1 million daily barrels of Iranian oil, which could be coming back online very soon.

American oil hits fresh lows even as Iran prepares to turn the pumps back on

On March 19, West Texas Intermediate, a common benchmark for U.S.-produced oil prices, almost fell below $43/bbl, and has been trading near or below its low since the 2009 recession for much of the past week. This has been driven by concerns that U.S. production has continued to grow even as the oil market remains oversupplied.

Iran’s nuclear program has been around for 35 years. The U.S. was instrumental in its early days, and even American utilities used it to market nuclear power as safe.

At the same time, the negotiations with Iran could lead to the country pouring hundreds of thousands of new barrels of supply into an already oversupplied market,  as soon as this summer. The country is starving for cash, and even with Brent crude — the international benchmark — trading below $55 per barrel, Iran could pour as much as 1 million barrels per day in new supply into the market “within a few months,” according to Iranian Oil Minister Bijan Zanganeh.

At the same time, American oil producers have reduced spending on development of new wells by tens of billions of dollars since late 2014. This has resulted in significant cuts in drilling activity so far this year. Through March 16, there were almost 600 fewer drilling rigs operating in oil fields in the U.S., more than a 40% reduction from year-ago levels.

However, the drilling cuts are yet to materially affect oil production, which is actually up so far in 2015. This is why, after a slight rebound in oil prices in late January and early February, prices have been steadily falling, on concerns about the continual oversupply in the global and domestic oil market.

Impact on U.S. oil producers 

While it’s been slow to materialize, American oil output is expected to begin flattening in the next few months. Though it’s unclear if production will actually decrease, at this point, flat U.S. production would likely reestablish some balance in the market, and lead to a recovery in oil prices. The Iran situation could significantly change the game, though.

The way things are unfolding, Iran would begin ramping up its production just as U.S. output stabilizes, meaning the current global oversupply continues. This would very likely keep oil prices down for an impossible-to-determine period of time.

The impact of oversupply — without all that extra Iranian oil —  is already being felt on U.S. producers’ stocks:

XOP Chart

XOP data by YCharts.

The Dow Jones U.S. Select Oil Exploration and Production Index has declined 27% since oil prices peaked in June; but it’s important to note that this index isn’t really a good measure of U.S. producers. As a starting point, it’s market-cap weighted, which means that ConocoPhillips, a U.S.-based international producer, makes up 13% of the index, while several refiners — which can actually benefit from falling oil prices — make up another 18% of the index. The SPDR S&P Oil & Gas Explore & Prod. (ETF)  (NYSEMKT: XOP  ) , on the other hand, is almost exclusively made up of independent U.S. producers, which are bearing the full brunt of falling oil prices.

While the majority of U.S. producers have enough capital to ride out the current environment, Iran’s million-barrel addition to the market could change the dynamic quickly for producers with limited resources. Even the best-managed and capitalized producers would likely be forced to make further cuts to drilling, and potentially, even some marginal production if prices stay low for an extended period of time.

While low oil prices are good for consumers, because oil is used for everything from a feedstock for manufacturing to the primary fuel for shipping, cheap oil means lower prices. However, there has already been some impact on domestic jobs in the industry, while many states that depend on taxes from oil producers will also feel a pinch. The double whammy here is more people potentially depending on government assistance, while the resources that help fund those services falls.
Looking ahead: Realities, unknowables, and operating based on likelihoods 
Many in the industry doubt just how much sustained production Iran could generate at this point, because the country quite frankly hasn’t had the money to invest in maintaining its oilfields with the current sanctions in place. Many in the industry doubt that it could sustainably produce 800,000 bbl/d at this point, and that it could take a year or more for the necessary investments to get the country to even that point on a sustained basis.

However, there’s little reason to doubt that the international community and Iran are likely, at this point, to reach an agreement that allows the country to turn the oil pumps back on, increase exports substantially, and reclaim its former place as the No. 2 OPEC producer behind its rival Saudi Arabia. While only time will tell how quickly — and how much — Iran can scale up its oil production, it’s not likely going to be a good thing for U.S oil producers.

That, in turn, is likely to be harmful for investors looking for a rebound in oil producer stocks, and further the damage to those already investing in the industry.

Oil pumpjack near Midland, Texas.

The Beast Of The Sea Speaks Blasphemous Words (Rev 13:6)

Cheney: Obama Is ‘Worst President in My Lifetime’

Dick Cheney  Speech
Former VP speaks to ‘Playboy’ about race, torture, military

By Arden Dier,  Newser Staff
Posted Mar 18, 2015 8:37 AM CDT
(Newser) – Dick Cheney spends his days sipping lattes in custom-ordered Starbucks cups surrounded by military history and political biography books in his study in Virginia—and apparently brewing over how President Obama has ruined the country. In an interview with Playboy, the former vice president describes the changes since his time in office.

  • On Ferguson: Cheney says Michael Brown’s killing shouldn’t be thrown “all over on the burden of race, or racial inequality, or racial discrimination.” He adds, “I don’t think it is about race. I think it is about an individual who conducted himself in a manner that was almost guaranteed to provoke an officer trying to do his duty.” He adds he’s “disappointed” with the Obama administration’s response to protests.