U.S. federal energy agency finds Iranian crude oil production will increase by the latter half of 2016 and likely result in a corresponding drop in oil prices. Pictured, an Iranian speed boat passes by oil tanks on the shore of the Sea of Oman in the Iranian free trade zone of Chabahar. File photo by Maryam Rahmanian/UPI | License Photo

WASHINGTON, Aug. 13 (UPI) -- An increase in Iranian crude oil production of around 600,000 barrels per day is likely in the latter half of next year, a U.S. federal report found.

Government officials and representatives from some of the world's largest oil companies have discussed potential opportunities with Iran, which is expecting sanctions relief as a result of a breakthrough nuclear agreement reached with the five permanent members of the U.N. Security Council, plus Germany.


Iran in December produced just under 2.8 million barrels per day, down about 20 percent from 2011 levels. The country reported oil production for July at 3.13 million bpd, an increase of six tenths of a percent from the previous month. Accounting from the Organization of Petroleum Exporting Countries, of which Iran is a member, finds Iranian oil production of 2.86 million bpd in July was a 1.1 percent increase from the previous month.

A report from the U.S. Energy Information Administration finds Iran has the capacity to increase crude oil production by around 600,000 bpd by the end of next year.

"The pace and magnitude at which additional production volumes reach the market depend on how quickly Iran meets conditions triggering sanction relief and how successful Iran is in production and marketing operations," the report said. "EIA expects most of this increase would occur in the second half of 2016."

EIA finds the eventual rise in Iranian crude oil production could push crude oil prices lower next year. Brent crude oil prices will average $59 per barrel next year, the agency said in a report published before its latest assessment on Iranian crude oil.

Crude oil prices are low because of a surplus of supplies in a weak global economy. EIA said it doesn't expect rival OPEC members to curb production to accommodate the return of Iranian oil.

Richard Nephew, program director for Economic Statecraft at Columbia University and former sanctions coordinator at the U.S. State Department, said in a research brief new oil will flow from Iran, but likely not at the levels that most optimists predict.