As Iran returns to the global oil market, adding supply to an oversaturated market, the country will try to increase its exports to China, according to Moody’s rating agency.
However, “regional rivalries could hinder this effort, with Saudi Arabia currently China’s largest crude supplier,” Waheed Sheikh, a Moody’s Associate Analyst, said.
“China will likely maintain its crude import policies rather than risk damaging ties with either country.”
Moody’s forecasts that Iran will add more than 500,000 barrels per day (bpd) to the global oil market in 2016, putting more pressure on prices.
While Russia and Saudi Arabia agreed February 16 to freeze their oil output in an attempt to stabilize prices, that deal doesn’t yet include Iran.
Furthermore, Iran faces hurdles to boosting its oil production, and thus needs to regain its customer base. The country has an ageing oil infrastructure, which industry experts say requires USD 150 billion-USD 200 billion in capital investment to modernize, Moody’s added.