Iran and the United States may be nearing a deal, which would limit the upside potential for oil and possibly even cause prices to fall.
The new optimism for a nuclear deal that would see U.S. sanctions lifted from Iran came with a tweet from the main negotiator of the country, Ali Bagheri Kani.
“After weeks of intensive talks, we are closer than ever to an agreement; nothing is agreed until everything is agreed, though. Our negotiating partners need to be realistic, avoid intransigence and heed lessons of past 4yrs. Time for their serious decisions,” Bagheri Kani tweeted late on Wednesday.
Oil prices immediately dropped following the tweet—and the media reports citing it—signaling what the effect of a deal would be if one was to be reached. At the time of writing, Brent crude and West Texas Intermediate were still trading lower, with Brent dipping below $93 per barrel and WTI at $91.77 per barrel.
Iran is already gearing up for a return of its crude to international markets. The country last year announced production ramp-up plans, and this week, media reported that officials from the state-owned National Iranian Oil Company had visited South Korea to discuss supply deals with local refiners.
If a deal is reached on Iran’s nuclear program, the country could add 500,000 bpd to global oil supply between April and May, Citi analysts have said. According to Rystad Energy analyst Louise Dickson, Iran can ramp up production very quickly, in a matter of four to six months, and it also has substantial amounts of oil in storage to offer on international markets if sanctions are lifted.
If the negotiations fail, however, oil will jump higher, possibly hitting $100 as demand growth continues to outpace production, prompting the International Energy Agency to call on OPEC+ earlier this month to do more to boost production.
By Irina Slav for Oilprice.com
More Top Reads From Oilprice.com:
- $90 Oil Is Only The Beginning
- Exxon, Chevron Eye Major Boost In Permian Oil Production
- Oil Prices Jump As OPEC+ Sticks With 400,000 Bpd Output Hike