Iranian crude could return to global markets sooner rather than later as this week’s start of negotiations between Tehran and the five world powers that, together with the U.S. signed the Joint Comprehensive Plan of Action that put an end to Iran’s nuclear ambitions in 2015.
The Oil and Gas Journal reports, citing oil analytics firm Kpler, that the start of negotiations is a positive sign for things to come: soon, Tehran and Washington could too sit at the negotiating table. If this happens and they reach an agreement on Iran’s nuclear plans, some 2 million bpd of Iranian crude could be added to OPEC’s total.
The talks were held in Vienna earlier this week, and Iran’s President Hassan Rouhani said, as quoted by CNBC, they were a success and that they opened a new chapter in efforts to save the so-called Iran nuclear deal.
Both Tehran and the new administration in Washington have signaled they are ready to start negotiating the lifting of U.S. sanctions and Iran’s oil industry’s return to normal operation. However, both sides insist that the other one makes the first move: Iran wants the U.S. to first lift sanctions before it stops enriching uranium, and the U.S. wants Iran to first stop enriching uranium before it lifts the sanctions.
Yet not everything has been smooth. An attempt by Washington to offer a sort of an olive branch to Tehran failed earlier this year. The attempt consisted of the U.S. side offering Tehran to unfreeze $1 billion in oil revenues blocked under the sanction regime, but Tehran called the proposal ridiculous.
It is important for both sides to settle their differences sooner rather than later. Iran is preparing for elections, and if the current government is replaced with a more conservative one, negotiations will become a lot harder. If they succeed, however, OPEC will have a problem on its hands, although it may not be as big as some would expect.
Iran is already exporting more oil than official numbers would suggest, mostly to China. This oil will simply come to light once the sanctions are lifted. Perhaps a bigger problem, for U.S. oil producers at least, is that Iranian oil will start flowing to India as well, and may displace some U.S. volumes that India has been taking in after it stopped its purchases from Iran because of the U.S. sanctions.
By Irina Slav for Oilprice.com
More Top Reads From Oilprice.com:
- Many Drilled U.S. Wells Will Never Be Completed
- Big Oil Is Dead Set On Exploiting The Wind Power Boom
- Big Oil Set To Return To Profit In 2021