Oil investors now have to contend with another wildcard: Iran will soon return to the oil markets. After a three-year dismissal, Iran may be ready to officially rejoin oil exporters by 2021. But does it really indicate the price of oil prices? Not necessarily.
Oil prices have responded positively after OPEC and its non-OPEC partners reached a favorable agreement last week to gradually curb production cuts starting in May. Starting next month, OPEC + will allow an additional 350,000 barrels per day to join the markets, with another 350,000 in June and June and 450,000 barrels per day for July.
If we are on the side of the rises, it is clear that the alliance is trying very carefully to disregard an increasingly delicate market balance, as the ongoing coronavirus crisis continues to cloud the market outlook.
The organization currently holds just over 7 million barrels a day, and OPEC Queen Saudi Arabia voluntarily cuts another 1 million barrels a day.
Imports of Iranian oil, which by all accounts has re-entered the oil export market in a sanctioned manner, especially thanks to China.
Abbas Araghchi, Iran’s deputy foreign minister for political affairs, called for the removal of Trump-imposed US sanctions as the only condition before Iran can agree to curtail nuclear activities under the 2015 nuclear deal, or JCPOA.
The United States, for its part, appears to be willing to play ball after President Joe Biden expressed support for returning to something similar to JCPOA. However, Biden’s government has determined that Iran must first take steps to return to compliance – a parameter that Tehran has rejected.
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Nevertheless, many experts expect the two countries to reach some sort of agreement, which could lead to the lifting of oil sanctions in the current year. E3 + 2 members of the nuclear power agreement (UK, France, Germany, Russia and China) are now meeting in Vienna to discuss what will happen next, with the Biden government also in Vienna, although there will be no face . -to meet the Iranians.
Prior to the sanctions, Iran was one of the world’s leading crude exporters capable of pumping more than 4 million barrels a day in its heyday.
While the spectrum of millions of barrels flooding the market can be upsetting for the bulls – and quite capable of derailing OPEC’s austerity efforts, investors should probably not be too scared about it.
The crude exports of Iran
Iran’s Crude Oil: Exports from 2008 to 2019
Source: CEIC
It is an open secret that Iran is disregarding US sanctions by using various cover-up methods to avoid its detection and sell its crude oil to China.
OPEC estimates that Iran’s crude production climbed to 2.14 million bps in February, up 190,000 bps from a 30-year low of $ 1.95 million in August. Yet it is a long way from the 3.48 million v / d Iran pumped in 2016 and 3.79 million v / d in 2017.
But here’s the forerunner: Some tanker tracking sources – which rely on satellite imagery to track global oil shipments – suggest that Iran’s oil exports are already quite high, meaning we may not see a big increase, not even if the sanctions are lifted.
Iran’s crude and condensate exports were estimated at 825,000 b / d in the first quarter, a significant improvement of 420,000 b / d in Q3 2020, but far from the country’s 2.125 million b / d in 2017. You can bet China is more to take the bulk of this crude oil, especially since Iran sells it to Chinese refineries at a strong discount on Brent crude oil.
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The relatively high level of exports in the midst of these sanctions could mean that Iran is not desperate for a nuclear deal – and in fact hopes to prove that sanctions mean nothing.
Big wildcard
Let us say that Iran remains a major card at this stage, despite the lack of certainty that an agreement with the US will be realized soon.
It is not as if Iran has a good idea to lack buyers if it decides to return to the market.
Bloomberg reported that Iran has already contacted at least five of its old Asian customers to enter into deals pending mitigation of sanctions. Traditionally, China and India were the largest buyers of Iran in Asia, followed by South Korea and Japan. India, the third largest oil importer in the world, will hope to diversify its crude resources and reduce its dependence on Iraq and Saudi Arabia.
But in the end, Covid-19 will still be the biggest game map of the oil market. Neil Beveridge, senior oil and gas analyst at Bernstein Research, says demand could potentially increase by 4 to 5 million barrels as we end up in 3Q and 4Q as the rollout of Covid-19 vaccines progresses – at which point it may not be much no matter what Iran does or does not do.
The United States has so far introduced the fastest vaccine deployment in the world as Bloomberg, placing itself in the best position for a reopening economy. The latest vaccination rate is 3 053 566 doses per day, which means that it will cover 75% of the population, or the so-called herd immunity number, in just three months.
By Alex Kimani for Oilprice.com
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