Iran’s surging unemployment, cost of living and corruption, coupled with government apathy, have fueled one of the worst mass anti-government protests since the Green Movement of 2009. Protests erupted around the country and have been serious enough to threaten the ability of the country’s supreme leader, Ayatollah Ali Khamenei, to remain in power. Predictably, the government of this oil-exporting major player is responding by cracking down with violence and mass arrests.
Geopolitics Often Significantly Influence Oil Prices
Iran being the third-largest OPEC member, any disruption that the protests might cause would seriously upset global supplies. This possibility has introduced a risk premium to oil prices, the reason for a bump in prices seen. At the beginning of January, Brent crude traded as high as $68.27, and U.S. crude reached $61.86, both the highest levels since May 2015. While the unrest hasn’t affected Iran’s oil output at this point, jitteriness over the possibility alone has been enough to raise prices.
Certainly, there are other factors that have influenced prices – the prospect of renewed sanctions against Iran have raised fears that the country could be shut out of the international oil market over the long-term. Nevertheless, the protests in Iran have been responsible for at least some of the current bump in prices seen.
A Trend in Place?
With multiple indications pointing to disruptions to Iran’s ability to supply the world oil market, prices are likely to stay strong. This is a prospect that hasn’t been lost on U.S. drillers. American shale fields have increased production by 16% since 2016, or close to 10 million bpd at the end of 2017.
According to Sigma Drilling Technologies, the supplier of pulsation control solutions used by gas and oil drilling operations both large and small, American drillers have responded to the prospect of a lasting upward trend in prices by investing heavily in pulsation dampeners and other efficiency-boosting improvements to their operations. It’s a move that makes sense, considering that an ability to quickly respond to increased demand is essential to any drilling company’s bottom line.
