Impact of Iran nuclear deal on oil markets
15 July 2015
Iran's oil and financial sanctions will be lifted with a phased deal struck on its nuclear program on Tuesday (See: Markets cheer as Iran, West clinch nuclear deal), but the market won't immediately see more crude, forecasts oil analyst Platts.
The country is currently exporting around 1 million barrels daily (b/d) of crude, less than half the 2.2 million-2.3 million exported before the European Union and US imposed crippling oil and financial sanctions in mid-2012.
According to Platts, "The market probably won't see any noticeable increase in Iranian crude supply until next year. Iran by 15 October must show that it has met its commitments and the International Atomic Energy Agency hopes to issue a final report by 15 December.
The US Congress also needs to approve the deal, although President Barack Obama earlier Tuesday reiterated that he would veto any legislation preventing implementation.
The first Iranian oil release may come from roughly 40 million barrels of floating storage in the Persian Gulf. About half of this is crude and the rest condensate.
Officials also think they can export an additional 500,000 b/d of crude within months of sanctions removal and then another 500,000 b/d after that.
Iranian oil minister Bijan Zanganeh has said Asia will be Iran's main target. That's where oil demand is still growing, albeit more slowly than before.
Europe, which took about 600,000 b/d before the sanctions hit, will also be a focus, a senior oil official said Tuesday. However, wherever Iran tries to sell its oil there will be challenges. Competition has increased everywhere, partly because lower US reliance on imported crude has sent former suppliers looking for new markets.
Like other oil exporters, Iran sells its crude on a market-related basis and adjusts pricing from month to month. There may be room for inventiveness in other areas, such as credit terms.
Once sanctions are lifted, Iran hopes to attract top international oil companies to its upstream sector to help it develop its vast reserves of oil (about 157 billion barrels) and gas (about 1,200 Tcf).
Zanganeh has held talks with firms like BP, Shell, Total and Eni. The country plans to launch a new new upstream contract model in December.
US companies have to abide by a separate raft of US sanctions not related to the nuclear issue.
A US embargo on imports of Iranian oil will remain in place.