• It's Here!

    Etf Pro

    Get the big financial market moves right, bullish or bearish with Hedgeye’s ETF Pro.

  • It's Here


    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

Last Friday we hosted a call with former Energy Secretary Spencer Abraham and Senior Energy Analyst Joe McMonigle, co-founders of the Abraham Group, LLC. The company is an independent and international strategic consulting firm focused on the energy sector and based in Washington D.C. As part of our acquisition of Potomac Research, we’re pleased to announce our new strategic partnership with The Abraham Group, LLC.

VIDEO Replay Link


Below we offer a summary of the most important discussion points:

  • Iran’s most immediate goal, regardless of oil prices, is to ramp up production and re-enter global energy markets. They are perfectly willing to continue cutting official selling prices to regional benchmarks.
  • Without the help of international capital assistance, Iran can ramp up production by 700K B/D by the end of March, equivalent to another Libya coming online in 2014. In our estimation most sources have underestimated this number. Low oil prices will not deter this ramp in production.
  • The 40-50MM barrels that Iran has floating in offshore storage would translate to about 150-200K B/D that is available for immediate delivery. We believe Iran has lined up buyers for their floating storage (India Europe likely first two destinations).
  • U.S. sanctions related to human rights and terrorism still apply to transactions involving:
    • U.S. banks, insurers, and most importantly transactions in US$
    • Iran’s hardline elite with new sanctions slapped on companies accused of supporting Iran’s ballistic missile program

Consensus opinion is that shipping and marine insurers worldwide will move slowly in partnering with commercial tankers that would step up and transport Iranian crude and condensate. We believe these negotiations may develop faster than consensus expects.

  • Iran’s domestic economy (not just trade) far beyond the energy industry is dependent on foreign capital. For one, domestic primary energy consumption is up 50% in 10-years. Attracting this capital is reliant on complying with stipulations under sanctions relief. Our expectation is that they will cooperate in order to attain full and permanent sanctions belief.
  • Despite being geopolitically aligned with Iran, Russia and Iran may be in competition from an energy trade perspective. The EU is making a concerted effort to diversify away from Russian energy dependence. Russia took many of Iran’s clients, especially in Southern Europe, after the EU import ban and tanker shipping insurance sanctions enacted in July 2012.

Ben Ryan