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Breaking News:

ADNOC Considered Buying Oil Giant BP

The Market Thinks There Will Be A Sanctions-Easing Deal With Iran

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

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  • Mamdouh Salameh on August 25 2023 said:
    The market is absolutely wrong. We aren’t going to see a new Iran nuclear deal soon or ever unless it is on Iran’s own terms.

    And this means immediately lifting all US sanctions against Iran with no new restrictions whatsoever to its nuclear and ballistic missile development programmes. Moreover, Iran will insist that the US drops the designation of the Islamic Revolutionary Guards Corps (IRGC) as a terrorist organization. These demands are virtually impossible for the Biden administration or any other administration for that matter to swallow.

    With its success in evading US sanctions and managing to export more than 1.5 million barrels a day (mbd) or 71% of pre-sanction levels, Iran is in no hurry to reach a new deal and would rather focus its efforts on ejecting US military presence from Iraq, Syria and the entire Middle East thus achieving a great geopolitical and strategic victory over the United States.

    If the unthinkable happened and a new nuclear deal was reached (very highly unlikely), the maximum Iran could add to global supplies is estimated at 450,000 barrels a day (b/d). Moreover, Iran was given a production quota of 4.0 mbd by OPEC in 1979 but never once managed to achieve it.

    Therefore, achieving a production level of 6.0 mbd as Iran’s oil minister Bijan Namdar Zanganeh hopes is a pipedream. Neither Iran’s oil infrastructure nor its depleted reserves are capable of undertaking.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

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