News ID: 201320
Published: 0359 GMT September 26, 2017

Official: Oil at $60 a barrel could stabilize energy market

Official: Oil at $60 a barrel could stabilize energy market

Oil prices near $60 a barrel could stabilize the energy market and signal for investors to invest and develop petroleum fields, according to a senior executive of Iran's state-owned oil company.

Saeid Khoshrou, the director of international affairs at the National Iranian Oil Company, told CNBC on Tuesday that low, fluctuating prices in the oil market gave investors the wrong impression.

When oil prices hover near $60, "a lot of investors maybe can invest on developing oilfields, but when it's $45 or $40, it's a different story", Khoshrou said.

"I think something around $60 would stabilize the market," he said, adding the price point is "good enough to attract investors to the field, especially in the Middle East, where there are a lot of low cost fields that can easily ... be developed, feed the market (and) meet the requirement in the market".

Iran's energy exports suffered under international sanctions. Those sanctions were lifted earlier this year, allowing the OPEC producer to export oil to the international energy market.

The lifting of the sanctions, along with Iran's low cost of production and untapped energy reserves, make the country a potentially attractive investment destination.

Currently, on average, Iran's cost of production is around $10 per barrel, according to Khoshrou, and he pointed to the ratio between Iran's oil reserves and production capacity as an indication of why the country is a good prospect for oil investors.

OPEC data showed that in 2016, Iran's proven crude oil reserves were about 157.2 billion barrels, while its production capacity was about 3.65 million barrels a day.

Proven reserves indicate an estimated quantity of all hydrocarbons — crude oil or natural gas — which geological and engineering data demonstrate with reasonable certainty to be recoverable from known reservoirs under existing conditions, according to OPEC.

"If you take a look at the reserve and the production ... this ratio itself gives the signal (that) it is a good place to put money and invest on it."

But investment potential in Iran could be a moot point if oil prices falter again next year, despite the OPEC production cuts that are currently in place.

"For next year, we see very strong growth in non-OPEC supply," Peg Mackey, chief OPEC oil analyst at the International Energy Agency (IEA), told CNBC.

Mackey said the IEA expects a growth of 1.5 million barrels a day in 2018 from non-OPEC producers compared with demand growth of 1.4 million barrels a day.

"We see slightly higher non-OPEC growth versus demand growth. In that situation, it's hard to imagine a dramatic decline in inventories next year," she said.

Khoshrou added that currently Iran is producing around 3.8 million barrels per day, in line with the country's OPEC production quota, against a capacity of around four million barrels a day.

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