Oil prices could further fall to $25 (£17, €23) a barrel by March as Iran is expected to begin increasing its oil production soon following the removal of international sanctions, Fereidun Fesharaki, the Iranian chairman of Facts Global Energy (FGE), has said. Brent was trading at $34.21 a barrel, up 1.36% during Asian trading hours.
Fesharaki, who was earlier an oil adviser to the Iranian prime minister, had warned in March 2015 that crude prices could trade between $35 and $40 a barrel by the end of the second quarter of 2015.
Iran already has customers lined up across Greece, Italy, Turkey, Sri Lanka, South Africa and South Korea, and would have no problem in increasing its oil output by half a million barrels per day within one week of sanctions being lifted. Japan too was interested in buying crude from Iran had it not been for the sanctions.
Iran's re-entry into the oil market could exacerbate its tensions with Saudi Arabia, which has been cutting its oil prices in Europe. The 70% decline in crude oil prices since June 2014 has led to fears that Saudi Arabia could devalue its currency, which plunged to a record low against the dollar on 7 January.
Amid all these developments, Saudi deputy crown prince Mohammed bin Salman said Saudi Aramco, the state-owned company, which is the world's biggest oil producer, could be partially privatised. "That is something that is being reviewed, and we believe a decision will be made over the next few months," Salman recently told The Economist.
Norbert Rücker, head of commodities research at Julius Baer, said: "The oil market seemingly has become more pessimistic on the world growth outlook and oil demand prospects than most other financial markets."
The rivalry between Saudi Arabia and Iran has put paid to hopes that Opec would agree to curb production in order to boost prices. "The cartel's dysfunction and the fact that the incentives within the Middle East are to produce more rather than less have been evident for some time," Rücker added.