Oil and Gas: Agreement on key parameters of Iran nuclear program: Various news reports indicate that the world power and Iran have agreed on the broader contours of Iran’s nuclear program, while a final accord will be made by 30 th June this year. Framework measures, if implemented by Iran, would eventually result in easing sanctions related to Iran’s nuclear program, which were imposed by EU and US in 2012. The sanctions, amongst other things, imposed a ceiling on the country’s export.
Implication for oil price: In case the final accord is reached by 30th June, embargo on oil export of Iran would be lifted, which would bring additional crude in the international market already brimming with supply. Prior to sanctions, Iran’s share in global oil export was around 10%, which post sanctions has declined to merely 3-4% (1 million barrels per day), as required by the current regime of sanctions. If sanctions are lifted, Iran intends to bring additional 1 million barrel of crude oil in the international market, which would further put pressure on the oil prices.
When can Iranian oil hit global market? Though it is unclear how quickly Iran can resuscitate its decrepit oil industry even if sanctions are removed, but the country is eying to add a million barrels to daily oil production shortly after a deal to lift sanctions. At a time when there is a daily excess of nearly 2 million barrels of supply on the world market, another million barrels a day. Though removal of cap on oil exports remain a key priority for Iran and the country has been making preparations to bring its crude back to the market as the state-owned NIOC is already in talks with at buyers to sell them more crude if the restrictions are lifted, such a boost would take months because sanctions may be rolled back slowly.