New Nuclear Deal with Iran Will not Make Imminent Impact on Oil Markets

A new agreement on the Iran nuclear deal is expected to see the sanctions on the country’s oil sector being lifted, but it could still take several months for Iranian crude exports to start flowing. And even if everything goes according to plan, it may only offer a short term ease to tight oil markets.

Oil prices soared to $120 a barrel for the first time in a decade last week as the West continued to impose sanctions on Russia. The prices dropped near the week’s end amid hopes that the nuclear deal with Iran is close.

The talks on the nuclear deal appeared to get close to a conclusion last Friday, with hopes of an imminent ministerial meeting.

However, even if a deal is struck this week, it could take several months before Iran could restart exporting its oil due to pending confirmation of Iran’s compliance with the deal. Therefore, an additional Iranian oil in the global market is not expected before May or June.

When Iran nuclear deal was first signed in 2015, sanctions could be fully lifted six months later, once Iran’s nuclear related measures were verified by the U.N.

Moreover, most refiners around the world need to make technical arrangements to reintroduce Iranian oil into the mix.

If and when Iran’s compliance is confirmed, however, the markets will not need to wait for extraction from oil fields as Iran could release crude from storage and help ease some of the pressure from oil prices.

Iran, which has the world’s fourth-largest oil reserves, is largely dependent on oil revenues for its economic well being. The country’s oil exports had reached as much as 2.8 million bpd in 2018 until the U.S. withdrew from the nuclear agreement and reimposed sanctions, plummeting them to as low as 200,000 bpd.

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