Iran says it expects a major boost in oil exports now that it has a nuclear deal in hand. In a sign the market is able to do without, however, the U.S. government said Iran's return is unlikely because of the ample supply of oil elsewhere.
Iranian Deputy Oil Minister Kazzem Vaziri-Hamaneh said last week relief from economic sanctions could stimulate an oil export economy hamstrung by Western sanctions.
"Certainly, the annulment of sanctions will facilitate and accelerate exports operations and supply of Iranian oil to the global market," he said.
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Members of the P5+1 - the United States, Russia, China, United Kingdom, and France, plus Germany – reached a breakthrough nuclear agreement with Iran last month. Iran under the terms of the agreement can export only around 1 million barrels of oil per day. Before U.S. and European sanctions went into force in 2012, Iran was exporting around 2.5 million bpd and Washington said last weekend those sanctions will remain in place.
A joint action plan agreed to by the P5+1 and Iran calls for a six-month pause in efforts to reduce Iran's crude oil sales in exchange for nuclear enrichment concessions from Tehran.
"However, the joint action plan does not offer relief from sanctions with respect to any increases in Iranian crude oil purchases by existing customers or any purchases by new customers," U.S. Secretary of State John Kerry said.
The Organization of Petroleum Exporting Countries said in its latest market report that member state Iran produced 3.2 million bpd in October, a 9 percent decline from the previous month. The U.S. Energy Information Administration, which ranked Iran sixth, behind Canada, in terms of 2012 oil production said oil exports account for 80 percent of Iran's export earning and more than half of its government revenue. Kerry said the impact of those sanctions on Iran's economy forced its hand at the negotiating table in Geneva. Last year, the Iranian currency collapsed under sanctions pressure and the IMF said in November the Iranian government needed to do more to address the structural challenges in its economy.
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Iranian Oil Minister Bijan Zanganeh heads to Vienna this week to try to convince OPEC his country is ready for business now that Tehran gained some relief through nuclear diplomacy. OPEC, in a series of market reports this year, said it was mindful of the increases in oil production from North America. While the United States is restricted in terms of crude oil exports, an increase in domestic production means it's less reliant on foreign countries to satisfy its energy demands. The White House said the EIA determined that international oil supply disruptions were offset largely by production from the United States and Saudi Arabia, suggesting the global markets is well-supplied with crude oil. Tehran may be waiting in the wings for sanctions relief, but from Washington's perspective, the oil market has already adjusted to a world without Iran.
"I determine … that there is a sufficient supply of petroleum and petroleum products from countries other than Iran to permit a significant reduction in the volume of petroleum and petroleum products purchased from Iran by or through foreign financial institutions," President Barack Obama said.
By. Daniel J. Graeber of Oilprice.com