Iran will struggle to raise exports by more than 500,000 barrels a day, Moody´s says

Iran was set to add to an already oversupplied oil market in 2016, but the country would struggle to meet its stated export targets due to multiple hurdles, Moody´s said on Monday.

The ratings agency estimated the central-Asian producer would be able to add more than 500,000 barrels a day to the global crude oil market but would struggle to add "meaningfully more than that", Waheed Sheikh, a Moody's associate analyst said in a research note.

To raise output, Iran first needed to recover its base of customers, attract investment to upgrade its oilfields and would need to navigate a range of political risks.

On 20 February, Iran´s deputy oil minister said the country aimed to raise production by 700,000 barrels per day "in the near future", Shana reported.

Also on Saturday, Mohsen Ghamsari, director of international affairs of the National Iranian Oil Company (NIOC), claimed exports had already been boosted by 500,000 barrels per day since the lifting of sanctions.

"Iran will try to increase exports to China, but regional rivalries could hinder this effort, with Saudi Arabia currently China's largest crude supplier. China will likely maintain its crude import policies rather than risk damaging ties with either country," Sheikh said.

Furthermore, Moody´s cited estimates from industry analysts according to whom Iran´s ageing oil infrastructure needed between $150bn to $200bn in capital investments in order to modernise.

"Many integrated oil companies are simply unable to invest right now because low oil prices have weakened their earnings and pushed their cash flow deeper in the red. Integrated oil companies will need to cut capital spending through at least 2016," the analyst added.

Tehran was also still facing a US ban on American companies investing in its creaking oil sector.

Against that backdrop, the upcoming parliamentary elections in Iran would decide whether hard-liners of reformers came to power, which in turn would influence whether the country sought rapproachment with the US.

There was also the risk that Iran might fail to comply with the nuclear agreement brokered with the P5+1 nations.