WTI crude stocks rose less than expected according to the latest data from the U.S. Energy Information Administration (EIA), which caused prices to improve after suffering a 12-year decline to fall below $30 per barrel (/bbl). However, there are still major headwinds facing oil markets in 2016 as certain international sanctions against Iran were lifted on Jan. 16 that will allow the country to increase its crude exports. According to Barclays Capital, Iran is expected to boost crude exports by a minimum of 500,000 bbl/d this year.

The investment firm stated that it is likely international investments from the West into Iran will be announced beginning next month, but will proceed slowly given current prices and remaining trade sanctions against Iran. These restrictions limit direct investments into Iran from U.S. companies as well as prohibit U.S. dollar trade with Iran.

“The primary sanctions remain in place and limit the trade of certain goods that contain U.S. content, including for the oil and gas industry. Upstream and downstream technologies will have to be in compliance with U.S. export controls. Many of the deals being considered at this time are going to be engineering based, so investors must be aware of how much of that content is from the U.S. and subject to special restrictions,” Barclays said in a Jan. 17 research note.

Regardless of the amount of Iranian crude that makes it to the global market, this increase will have a negative impact on an already struggling market. It is possible that some of the decline in crude prices has been driven by the impending lifting of sanctions against Iran and there could be some improvement once the actual impact of this increase in exports from Iran is actually felt in the months ahead.

Further improvements could be felt as U.S. producers continue to cut production as they adjust to lower prices below the breakeven point. According to Barclays, higher prices will be necessary to match supply with demand beginning in 2017.

“A sustained period of sub-$40 oil prices might not have a profound impact on demand, but it will have devastating effects on the supply side,” the investment firm said in a Jan. 18 research note. Low prices could result in 50% year-on-year declines in North American E&P budgets for 2016, which would greatly reduce production.

NGL prices are also negatively impacted by depressed natural gas prices, which fell at both Conway and Mont Belvieu despite colder temperatures. The Conway price was down 6% to $2.04 per million Btu (/MMBtu) while the Mont Belvieu price dropped 10% to $2.03/MMBtu. Though there have been colder-than-normal temperatures in the Northeast and Midwest, forecasts are predicting warmer temperatures in February and storage levels remain very high.

Lower gas and crude prices are driving down prices on both the light and heavy end of the NGL bbl. with prices down across the board at both hubs. Compared to the same time last year, NGL prices have fallen heavily from what was considered at the time to be a very down period.

It is unlikely that NGL prices will receive much of a bump the rest of winter and are expected to experience another downturn in the spring shoulder season with storage overhangs from this moderate winter.

Should demand pick up or not fall off as heavily as expected during this time, it is possible that prices remain firm or possibly improve before the first-half of the year ends. It is expected that gas and liquids prices will begin to improve in the second-half of the year as cooling demand improves and more cracking and export capacity comes online.

The theoretical NGL bbl price fell 9% at Conway to $13.86/bbl with a 13% decline in margin to $6.40/bbl and the Mont Belvieu price was down further at 11% to $14.14/bbl with a 13% drop in margin to $6.73/bbl.

The most profitable NGL to make at both hubs remained C5+ at 46 cents per gallon (/gal) at Conway and 47 cents/gal at Mont Belvieu. This was followed, in order, by isobutane at 28 cents/gal at Conway and 24 cents/gal at Mont Belvieu; butane at 21 cents/gal at Conway and 23 cents/gal at Mont Belvieu; propane at 10 cents/gal at Conway and 13 cents/gal at Mont Belvieu; and ethane at 1 cent/gal at both hubs.

The EIA reported a 178 billion cubic feet withdrawal of natural gas from storage the week of Jan. 15, which reduced storage levels to 3.297 trillion cubic feet (Tcf) from 3.475 Tcf the previous week. This was 24% greater than the 2.668 Tcf posted last year at the same time and 17% higher than the five-year average of 2.824 Tcf.