U.S. and Iran may soon close a nuclear deal that could take the wind out of the latest oil rally's sails, according to traders interviewed by Reuters.
The talks between Washington and Tehran resume this week, and expectations are that this would be the final round that would end with either a deal or a "nuclear crisis", according to the U.S. side.
"This can't go on forever because of Iran's nuclear advances. This is not a prediction. It's not a threat. It's not an artificial deadline. It's just a requirement..." said an unnamed official from the State Department who briefed media last week on the condition of anonymity.
"Given the pace of Iran's advances, its nuclear advances, we only have a handful of weeks left to get a deal -- after which point it will unfortunately be no longer possible to return to the JCPOA and to recapture the nonproliferation benefits that the deal provided for us," the official also said.
Ahead of the final round of talks, Washington made a gesture of goodwill by restoring sanction waivers for foreign companies doing nuclear power business with Tehran to allow international cooperation in non-military nuclear energy utilization. The waiver, however, aims to also make it harder for Iran to use its nuclear sites for weapons development, Reuters noted in a report from last week.
Meanwhile, any progress on the talks would weigh on oil prices, with some noting that it was by design.
"There has been speculation that this rally was going to encourage some sanctions relief and get more Iranian oil on the market," John Kilduff from Again Capital told Reuters.
A State Department official, however, said that nothing was certain yet, and the waiver did not mean that a deal was in the making. It was, the official said, necessary to launch technical discussions on the deal.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More
Comments
The only deal Iran will accept is one on its own terms meaning a lifting of all US sanctions first with no new restrictions imposed on its nuclear and ballistic missile development programmes. This is something the United States and its allies won’t accept.
The global oil market has already factored in this reality so it hardly impacts prices. If in the very unthinkable event US sanctions have been lifted, the impact on prices will still be hardly felt since the maximum Iran could bring to the market doesn’t exceed 650,000 barrels a day (b/d) being the difference between its pre-sanctions and under-sanctions crude exports.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London