Phil Flynn's Energy Report
The Energy Report for 10/28/2013
Oil has broken down and targets the $88 dollar level despite Fridays oversold profit taking bounce. No one must ponder how bearish oil might get if Iran's oil gets unleashed on the global market. Reuters news reports that "Iran reaching out to its old oil buyers and is ready to cut prices if Western sanctions against it are eased, promising a battle for market share in a world less hungry for oil than when sanctions were imposed.
New Iranian President Hassan Rouhani's "charm offensive" at the United Nations last month, coupled with a historic phone call with U.S. President Barak Obama, revived market hopes that Iranian barrels could return with a vengeance if the diplomatic mood music translates into a breakthrough in the stand-off over Tehran's disputed nuclear program. The Islamic republic's crude exports more than halved after the European Union and United States, which accuse Tehran of seeking nuclear weapons, tightened sanctions in mid-2012, cutting its budget revenues by at least $35 billion a year. "The Iranians are calling around already saying let's talk ... You have to be careful, of course, but there is no law against talking," said a high-level oil trader, whose company is among many that stopped buying Iran's oil because of sanctions.
The West's energy watchdog, the International Energy Agency (IEA), said this month that despite the first high‐level talks between Iran and the United States since the 1979 Iranian revolution, few expected sanctions to be eased soon. "Rather, most expect that turning the clock back on sanctions will be a drawn-out process based on tangible diplomatic progress with regard to the issues at hand, which many still view as a remote prospect," the IEA said.