Agreement in Lausanne to restore Iran back into the international community could easily trigger a further sell down towards levels around $20 per barrel. Ahead of the talks, Iran’s oil minister Bijan Namdar Zangeneh said that the country could easily increase production by 1m barrels per day within months of sanctions being lifted.So reports the Telegraph. $20 is quite a prospect if it were to last more than a week or two. Of course, that's what sometimes happens with really extreme market movements, we need only recall the twin, fleeting peaks of $40 (1990 when Saddam invaded Kuwait) and $147 of more recent memory. The precise price involved in such events never really makes any economic impact, whatever its effect on the headlines.
Can $20 be seriously countenanced? The commodity traders' slogan runs: if in doubt, go short - because there is always more of the stuff (any stuff) out there than the conventional wisdom ever imagines: and to Hell with Malthus and the peak-oilers. There is certainly plenty of oil in the Middle East with marginal production cost even lower still.
But if $50 is embarrassing to Putin and many others besides, well ... It seems longer ago than 2008 that he was mentioning $200 as the next port of call. Isn't it interesting that Mr Zangeneh should lob this new scenario into the proceedings? My understanding is that the Russians are quite important actors in the current goings-on. Perhaps he knows that they know that it's just a come-on to the oil consumers around the table. Then again, the USA is set to become an exporter ...
Anyhow, the Iranians will no doubt chuckle at the thought of how $20 sounds on the other side of the Gulf. What mischief. I can't see the Saudis calling off ops in Yemen any time soon.