With the deal that has been struck between the US and Iran over curbing Iranian nuclear activities on Sunday, there has already been a reaction in the oil markets with Brent crude falling by more than 2% in early trading on Monday.
Whilst the deal between the US and Iran doesn’t lift sanctions on oil trading, it is anticipated that if, after the initial 6 month agreement, Iran shows it is genuine in meeting the requirements of the agreement, Iranian oil exports could resume. However, Societe Generale have said that even if a comprehensive agreement is the final outcome, it would take Iran between 3 and 9 months to ramp up exports to pre 2011 levels. They also stated that the existing 6 month agreement should not have any impact on oil prices “aside from short-term sentiment”.
Many countries including the US and the European Union have banned imports of Iranian oil and others such has China, Japan and India have severely cut their imports. The result has been that Iranian oil exports have fallen from 2.5 million barrels per day to approximately 1 million barrels per day today. The impact on the Iranian economy has been drastic with high levels of inflation and youth unemployment.
The Impact on Heating Oil Prices
Will this deal affect the price of heating oil? At this stage it is difficult to tell as we are now heading into the winter season where demand picks up significantly and any cut in crude oil prices may not necessarily result in a cut in heating oil prices. Given that any easing of oil exporting sanctions won’t come into place with Iran until 6 months down the line, it is unlikely that any significant price drops will take place beyond the initial reaction from the markets to increased stability in Middle Eastern oil supplies that the agreement may bring.
So, whilst the agreement is good news, any real effect won’t take place until 6 months’ time if Iran keeps to its promises. By then we will be through the winter when heating oil prices normally drop because of reduced demand.
Advice from BoilerJuice
Our advice? BoilerJuice don’t have the ability to control or predict heating oil prices in the UK and, whilst our comparison model does help to ensure we keep heating oil prices down for our customers, we would still advise our customers to buy their heating oil now whilst prices are still relatively low. There have been some very minor increases in prices over the last week or so as the temperatures outside have dropped and, as we move closer to Christmas, we are expecting prices will increase. Average prices across the UK from our participating suppliers at the time of publishing this blog are still cheaper than at the same time last year so there are still savings to be made.
To keep an eye on heating oil prices and see recent trends, check the Heating Oil Price Chart.