Will Iran finally get the green signal to resume its crude oil exports to the world? This was one question that even overtook the Middle East crisis in deciding the fate of the crude oil prices in recent sessions.
The deal that is claimed to be historic revolves around the world’s most powerful nations and Iran having agreed on the preliminaries of Iran’s nuclear program, which include the framing of a new comprehensive nuclear deal in exchange for lifting the sanctions impose on Iran, by the end of June 2015. If all goes as planned, the embargo on its crude oil exports will be eased significantly.
Where decline in oil prices is a boost to economic growth in consuming countries,
The dip in prices has also had repercussions on tax revenues and jobs in many oil producing countries. At the onset, it was quite believable that after a deal on Iran’s nuclear program, crude oil prices would faint further as the country’s exports would add to the already oversupplied global oil market. However, it was seen that the prices dipped only temporarily after inching up again.
There are few lacunas that might not sink the oil prices as perceived.
Firstly, the deal itself; analysts around the world are now cynical not only about the timing but its mere materialization. ‘Even if a final deal is reached, we do not expect any physical market impact before 2016,’ say Adam Longson, head of oil research at Morgan Stanley.
Also, even though Iran has a backlog of unsold oil of around 30 million barrels per day, Saudi Arabia still has the power to continue controlling crude oil prices; it cannot sustain high prices or low prices for too long, which will deprive them off the foreign investment and oil revenues, respectively.
there are speculations that even if a final deal is struck, there will be no quick removal of sanctions but a gradual slow-paced phasing out, which again builds an upward pressure on oil prices. The road to the ultimate agreement is still rocky, until such time the related downward pressure on oil prices might be restricted to some extent.