Iran has started ramping up its crude oil production eyeing a return to pre-sanction levels in a month or two, Deputy Oil Minister Amir Hossein Zamaninia told media, as quoted by Bloomberg.
Zamaninia added that the market would be able to swallow the additional volumes, which could bring Iran's total to somewhere between 3.9 million and 4 million bpd.
The news comes as Tehran hopes the new U.S. administration would lift sanctions imposed by the Trump administration on the country after it pulled the U.S. out of the so-called Iran nuclear deal. Hopes are President Biden would be willing to renegotiate the deal in a mutually beneficial way.
Higher Iranian oil production would not be welcome by the country's fellow OPEC members who have been cutting their own production to prop up prices. Indeed, the report immediately pressured international benchmarks, with Brent crude and West Texas Intermediate dropping by more than 2 percent at the time of writing.
Meanwhile, to add insult to injury, Oil Minister Bijan Zanganeh said Iran's oil exports were also on the rise, despite the sanctions.
"We set the highest record of exports of refined products in the history of the oil industry during the embargo period," Zanganeh said, as quoted by news agency Shana via Reuters.
Zanganeh added, in response to media questions, "I am not worried about regaining Iran's lost oil market share, and oil buyers do not limit themselves to one or two sellers." If the U.S. sanctions were lifted, he said, "We will return to the market stronger than before, sooner than you might think."
Zanganeh said last month that Iran aimed to boost oil exports to 2.3 million bpd once sanctions were lifted, from less than 1 million bpd right now, according to official data. The situation remains tricky, however, as both sides want the other one to make the first move.
President Biden's nominee for the Treasury Janet Yellen recently said the U.S. will only remove the sanctions if Iran returns to its commitments under the nuclear deal, while Tehran insists that Washington first lifts the sanctions before it re-commits to the deal.
By Irina Slav for Oilprice.com
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In no way could Iran raise its crude oil exports to 2.3 mbd even if sanctions were totally lifted. Iran was so successful in evading the sanctions that it has been managing to export some 1.5 mbd or almost 71% of its pre-sanctions exports. So the maximum it can add to the market post-sanctions is 500,000 barrels a day (b/d).
And while President Biden would be willing to renegotiate the deal in a mutually beneficial way, Iran has made it clear that that it will neither agree to any limits on its nuclear and ballistic missile development programmes nor will it negotiate with President Biden without a lifting of US sanctions first or at least a significant easing of the sanctions. This is something President-elect Biden will find difficult to accept and this is the crux of the problem. That is why US sanctions on Iran will continue well into the future.
On the other hand, one has also to consider the thought that Iran might be happy by the level of success it has achieved so far in nullifying and evading the sanctions. It might even think that the sanctions are a small price to pay for forcing the ejection of US military presence from Iraq and also making Iraq a vassal of itself thus achieving a spectacular geopolitical victory over the United States.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London