JBC Chief Believes Regime Change in Iran Could Send Crude Plummeting to $40

Meanwhile, the EIA warns of across the board production increase in 2020: File Image/PixaBay

As Brent crude traded around $64.23 on Tuesday afternoon in Asia and other benchmarks continued to exhibit range bound prices in the aftermath of U.S./Iran tensions and prior tothe U.S. and China signing a new trade agreement, some experts feared that the commodity could easily plunge to $40 per barrel in the near future.

Specifically, Johannes Benigni, chairman of JBC Energy, told media on Tuesday that the price plummet could occur if the widespread demonstrations and other factors currently at play within Iran cause a regime change.

Even though such a change would be incalculably beneficial to the region and to human rights, Benigni worried that "For the oil market, it would mean that the likelihood of oil prices dropping towards $40 is very high.

"Remember, Iran could easily add 1.5 million barrels within a shortest period of time, maybe even 2 million barrels, and that's a lot of oil."

Meanwhile, recent arguments from the analytical community about the decline of U.S. shale were seemingly forgotten on Tuesday when the Energy Information Administration disclosed that U.S. crude production is expected to rise by 1.06 million barrels per day (bpd) in 2020 to a record of 13.30 million bpd, above the EIA's previous forecast for a rise of 930,000 bpd.

Linda Capuano, administrator for the EIA, said, "We forecast U.S. crude oil production will reach new records in 2020 and 2021, driven primarily by higher production in the Permian region of Texas and New Mexico."

Presumably adding to Benigni's concern was Capuano's observation that "Both global oil supply and consumption are expected to grow in 2020, with supply from non-OPEC producers, particularly the Unites States, Norway, Brazil, and Canada, more than offsetting declining production from OPEC [the Organization of the Petroleum Exporting Countries]."

For the record, Brent on Tuesday eventually gained 31 cents to settle at $64.51 per barrel, while  West Texas Intermediate rose 15 cents to settle at $58.23 per barrel.

Edward Moya, senior market analyst at OANDA, stated in a report, "Oil prices are tentatively rebounding after seller exhaustion kicked [in] as investors await the next developments on the trade front and whether we see a strong pickup with global demand following the phase-one trade deal."