U.S. President Barack Obama’s signature foreign policy initiative – the historic nuclear deal with Iran – appears poised to fend off Congressional opposition.
After several Democratic lawmakers in the U.S. Senate came out in support of the Iran deal in recent days, the survival of the accord is all but assured. Democratic Senators Ron Wyden (D-OR) Richard Blumenthal (D-CT), and Gary Peters (D-MI) all announced their support for the nuclear deal with Iran, bringing the total number of Senators who have backed the deal to 41, enough to withstand attempts by Republicans to derail the agreement.
The deal will give international nuclear weapons inspectors access to Iranian nuclear facilities, and freeze nuclear activities for 10 years. In exchange, Iran will see sanctions relief.
That could lead to the revival of Iran’s oil industry, potentially allowing Iran to ramp up oil production and exports. Estimates vary, but Iranian officials are making ambitious statements about its comeback. Iran’s oil minister Bijan Zanganeh has said that his country will be able to ramp up oil production by 500,000 barrels per day immediately after international sanctions are removed, followed by an additional 500,000 barrels per day not too long after that.
“We should sell our oil whether the price falls or goes to $100 (a barrel). Even though we would like to sell our oil more expensively, the price is determined by the market,” Zanganeh said last month. “After lifting sanctions, Iran will take back the market share of more than 1 million barrels a day that it lost,” he said.
The U.S. Congress has until September 17 to act on the Iran deal, after which they lose the ability to take action. With the White House now in the driver’s seat, the agreement will likely take effect. That means that sanctions could be removed by the end of this year or early 2016.
For oil prices, the potential for Iran to bring a flood of crude back online amounts to another blow to the possibility for a strong rebound. U.S. oil production is declining, but not fast enough. Global oil demand is rising, but also not quite enough to soak up excess production. If and when Iran brings more supplies back online, that will push off an oil market adjustment a bit further into the future. Such a scenario has been expected since Iran and global powers reached an agreement at the end of June, but with Democratic support now squarely behind the deal in the U.S. Congress, it is a near certainty.
By Charles Kennedy of Oilprice.com
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