Iran to pump 500,000 barrels more a day into the global glut as oil sinks below $28

Oil prices reached a 2003 low below US$28 per barrel on Monday because the market braced for a rise in Iranian exports following the lifting of sanctions against Tehran over the past weekend.

The United States revoked sanctions that had cut Iran’s oil exports by a couple of million barrels per day (bpd) since their pre-sanctions 2011 peak to nothing more than A million bpd.

Iran, part of the business from the Petroleum Exporting Countries (OPEC), issued an order on Monday to improve production by 500,000 bpd, the nation’s deputy oil minister said.

Worries about Iran’s return to an already oversupplied oil market drove down Brent crude to $27.67 a barrel in early stages Monday, its lowest since 2003. The benchmark was down 29 cents US at US$28.64 by 1850 GMT.

U.S. crude was down 48 cents US  at US$28.94 a barrel, near a 2003 low of US$28.36 hit earlier in the session. Trading volumes were thin with U.S. markets closed for that Martin Luther King Day holiday.

“Iran’s return to the oil market has been around the diary for some time and therefore doesn’t really come as any great surprise,” Commerzbank senior analyst Carsten Fritsch said in a note.

“Nonetheless, prices were bound to react negatively for the short term cellular the negative market sentiment,” Fritsch added.

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Analysts say Iran may struggle to rapidly boost its production because its infrastructure, harmed by years of inactivity, needs foreign investment that will make time to arrive.

On Sunday, the top of Italy’s Eni SpA said Iran will have to attract $150 billion to become major producer, which “isn’t something which can be done inside a second.”

HSBC Leader Stuart Gulliver said the price of oil is likely to settle between $25 and $40 in a year’s time.

“Major producers are presently delivering 2-2.5 million bpd more than demand, so the real question is how long they can still overproduce at that level.” he explained in the Asia Financial Forum in Hong Kong on Monday.

Iran has a minimum of a dozen large crude carrier super-tankers filled and in spot to sell in to the market, and traders are betting that oil prices will drop again.

? Thomson Reuters 2016