A breakthrough in negotiations to revive the 2015 nuclear deal between Iran and world powers would raise the prospects of large quantities of Iran oil exports returning to the market as demand picks up, but according to most analyst it wouldn’t affect oil prices dramatically.
Talks between the U.S. and Iran are ramping up as both countries attempts to resolve a nuclear standoff which has led global oil markets being on edge.
Experts are skeptical of success though.
While the talks are the most significant step forward in recent time, neither sides are expecting a major breakthrough. Iranians officials are willing to comply if the U.S. ends Trump-era economic sanctions – a concession Washington seems unwilling to accept.
“I don’t think we can expect very much. There hadn’t even been any formal or informal talks between the U.S. and Iranian sides, so it looks as if at present time, these talks are going to be a bust,”Albert Wolf, Associate Fellow, Johns Hopkins School of Advanced International Studies.
Return of Barrels
Iran, which is one of OPEC’s largest oil producers, witnessed their exports slashed in recent years following The U.S. sanctions. Successful negotiations on Iranian crude could significantly impact oil market dynamics.
However, not all market watchers sees the Iran talks as consequential for the price of crude anytime soon.
“After an increase in Iran exports so far this year, our base case remains that a full recovery won’t occur until summer 2022, implying an agreement likely early-2022. Even if an agreement occurs earlier, we believe that it wouldn’t derail our constructive oil view relative to market forwards through 2022, given OPEC’s likely offsetting response and consensus expectation for Iran’s return by next year.”Damien Courvalin, Goldman Analysts
Exports to China
Despite the sanctions, Iranian crude production has seen a marked increase in recent months. The boost came as Tehran increases its oil shipments to China, a venture made possible with the help of anti-detection methods like turning of its ships’ transponders.
Iran though, are unfazed by the prospect of being stopped by the U.S. government thanks to more robust oil prices and China’s influence.
Whether or not a deal can be reached within the next few weeks, one certainty is that the global oil market dynamics are set for unpredictable times.