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Prospects of reviving the Iran nuclear deal have swung dramatically, from near certain in March 2022 to almost nil by the end of the year and somewhere in the middle currently. Although prospects of a deal being signed any time soon appear dim, relations between Washington and Tehran have warmed up considerably, with the Biden administration unblocking frozen assets and possibly even allowing Iran’s enrichment of uranium.
The U.S. administration might not admit it openly, but it has looked the other way and allowed Iran oil sales to hit record highs--obviously happy to keep the markets flooded in a bid to keep oil prices low.
Iranian crude exports exceeded 1.5 mb/d in May, the highest level since 2018 despite the country still being under U.S. sanctions. Tehran says it has boosted crude output to above 3 million bpd, again the highest since 2018. All that oil from Iran is certainly playing a part in keeping the markets looser than what Saudi Arabia and OPEC might hope for.
Earlier, reports emerged that the U.S. and Iran are making progress after resuming talks on a nuclear deal, a move that could ease sanctions on Iran's oil exports. Israel's Haaretz newspaper reported that the talks are moving forward more rapidly than expected, with the possibility of a deal being struck in a matter of weeks. Deal terms are likely to include Iran ceasing its 60% and higher uranium enrichment activities in return for permission to export as much as 1M bbl/day of oil.
A successful nuclear deal could change the oil markets, with former Iran oil minister Bijan Namdar Zanganeh saying that his biggest dream has always been to increase Iran’s oil output to six million barrels per day; earn $2 trillion through oil exports over the next two decades and use the income to invest in the country’s development.
Iran’s current production is considerably lower than the 2018 peak at 3.7 mb/d. Boosting production from the current level to anywhere close to 6mb/d could, however, take several years at the very least due to years of underinvestment.
By Alex Kimani for Oilprice.com
Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com.