Why oil traders should keep tabs on Iran even as nuclear talks seem unproductive
The United States and other world powers haven’t made much progress in reaching a new nuclear deal with Iran, but with data showing the country’s crude oil production has peaked at nearly two years, traders can’t afford to ignore the amount Iran can potentially add. to global supplies.
“Iran’s export capacity is around 2 million barrels a day, and it looks like it is already sidestepping sanctions” by selling oil under the radar to Chinese buyers, said Manish Raj, chief financial officer by Velandera Energy. He estimates that an additional million barrels per day of Iranian supplies are ready to hit the market as soon as sanctions imposed by former US President Trump are lifted.
In a monthly report released this week, the International Energy Agency said that despite US sanctions, Iran has “turned on the taps since the end of last year,” with its crude supply reaching 2.3. million barrels a day in March, which is the highest nearly two years.
The IEA said shipments of Iranian oil, including crude and condensate, slowed to a “ mere trickle ” of 2.5 million barrels per day after the former Trump administration pulled out of the country. Joint Comprehensive Plan of Action (JCPOA) in 2018 and imposed sanctions instead.
“China, however, has never completely stopped purchasing,†the agency said, noting that Iran’s oil sales to China in the fourth quarter of 2020 were 360,000 barrels per day, compared to an average of 150,000 barrels per day shipped in the first nine. months of last year. In March of this year, exports to China were estimated at 600,000 barrels per day, he said.
And the “big buys appear to continue” as Washington and Tehran resumed indirect talks in early April to restore the 2015 JCPOA, the IEA said.
Lily: What Iranian nuclear talks mean for oil prices
Discussions over the deal, which aimed to prevent Iran from developing nuclear weapons, took place in Vienna on Thursday. A tweet from Mikhail UlyanovThe Russian Ambassador to the United Nations said that “the general impression is positive” after Thursday’s meeting of the joint commission of the JCPOA.
The IEA said in its report that “if the negotiations are successful and the sanctions are relaxed, up to 1.5 [million barrels a day] more Iranian crude could return to world markets in a relatively short period of time. “
Discussions, however, have been complicated by Iran’s decision earlier this week to enrich uranium to 60% purity following a recent attack on its Natanz nuclear site, which it claimed. imputed to Israel. This brings Iran closer to the 90% purity required for military grade materials.
“If Iran continues to hold back its fire in the face of mysterious attacks on critical infrastructure and personnel, we still believe the odds are good that the nuclear deal can be reinstated and the sanctions lifted,” the analysts wrote. RBC Capital Markets in a research note. dated Wednesday.
The next two weeks will be “crucial” for the near-term fate of the Iran nuclear deal, they said, as the window for the deal to relaunch closes as Iranian election season draws near. . The nation will hold a presidential election in June.
If talks fail, “there could be some disappointment that could have a marginal impact on the oil market, although that doesn’t seem likely to take away much of the market in terms of current Iranian exports,” Marshall Steeves said. , energy markets analyst at IHS Markit.
“On the contrary, the question is whether the resumption of negotiations could lead to an increase in exports at some point this year,” he told MarketWatch. “We haven’t really anticipated a significant increase at this point, and I think most are taking a wait-and-see approach.”
Oil prices climbed Thursday, with June Brent BRNM21
BRN00,
up 36 cents, or 0.5%, to $ 66.94 per barrel on ICE Futures Europe. May West Texas Intermediate crude CLK21
CL.1,
ended at $ 63.46 a barrel on the New York Mercantile Exchange, up 31 cents, or 0.5%. Both raw benchmarks stabilized at their highest level since March 17, according to Dow Jones Market Data.
Although the prospect seems “to be a path for now,” a release from sanctions could “open the door” to an additional million barrels a day in exports, Steeves said.
Unless other members of the Organization of the Petroleum Exporting Countries compensate for the increase, “it could put pressure on prices,” he said. Again, if demand accelerates at that time, “it could be absorbed if the rate of growth in demand exceeds the additional growth in supply.”