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Iran and Saudi Arabia Add Woes to Crude Investors

Robert Scott

Iran's Sanctions Lifted, Saudi Arabia May Not Cut Production

Sanctions on Iran lifted

The market share war for crude oil is more intensified with Iran reaching out a deal with the European Union (FEZ) and United States (SPY) for its controversial nuclear project. The secondary sanctions on Iran are lifted. These are the sanctions that earlier restricted trade with European nations. Iran’s free arm in oil export could boost its economy. The other important things coming out of the Middle East is that the other regional leader, Saudi Arabia, is planning to diversify its economy from an oil-dependent one to a global economy. It signals that the production cut in crude by OPEC may be unlikely to happen.

Iran’s oil reaching the European market may also affect the spread between Brent and WTI (West Texas Intermediate). The series will focus on the following points:

  • Saudi Arabia’s importance as crude exporters
  • Saudi Arabia and shale oil producers
  • analysis of crude reserves and cost of production
  • Saudi strategic plan to diversify the economy
  • the cause of the growing rivalry among different top crude oil exporters
  • moving average analysis of different energy streams and a look at renewable energy

What worries the investors?

While WTI is reaching a 12-year low, the earnings of exploration and production companies such as ConocoPhillips (COP), EOG Resources (EOG), and others are edging lower. Integrated companies such as ExxonMobil (XOM) and Chevron (CVX) are somehow insulated because of downstream segments. The graph above shows the performance of XOM since the last four years.

In the next part, we’ll discuss the Saudi factor in the crude oil market and the situation that led to lower crude oil prices.

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