Global market begins to make room for Iranian oil barrels

The market has begun making room for Iran’s oil even as reports from Vienna have a dim view of the US folding back all its sanctions imposed on Tehran under the Trump administration.

The return of Iran’s barrels to the market is already taken for granted in many quarters, with the searing question basically being when it will happen and in what volume.

“Of course, this must be taken into account because it affects the balance of supply and demand. You just need to accurately understand the return schedule, what are the maximum volumes, but it all depends on when this will be done,” Russian Deputy Prime Minister Alexander Novak said Monday.

The International Energy Agency (IEA) said in its oil market report this month that Iran could bring its oil production to 3.8 million barrels per day by 2022 and become the key source of the global oil output growth.

All eyes are on Vienna where the remaining signatories to the 2015 nuclear deal are working to bring the US back to compliance by tearing down a maze of sanctions which have bedeviled the negotiations.

On Monday, outgoing President Hassan Rouhani sounded unusually sanguine. “The sanctions will be removed soon and foreign investment will flow into Iran,” he told the inauguration of several projects in Iran’s free trade and special economic zones.

Iran is set to usher in a new government headed by Ebrahim Raeisi, who bluntly ruled out any meeting with US President Joe Biden even if the US agrees to join the nuclear deal – the Comprehensive Plan of Action (JCPOA) – and remove its draconian sanctions on Tehran.

“We tell the United States that you have to remove all sanctions and must return to the deal and fulfill your obligations,” he told his first news conference in Tehran since winning Friday’s election.

Raeisi said any negotiation that secures Iran’s national interests will be supported by his administration, but “we will not tie the economic situation and people’s livelihood to these negotiations and we will not allow talks for the sake of talks.”

The remarks are the first clearest sign of his administration’s resolve to have the illegal sanctions removed.

Markets are now watching to understand what the likely removal of the sanctions might mean for the world’s supply of oil.

Iranian oil ministry officials have said a revival of the JCPOA and removal of the sanctions could bring back 3.8 million barrels per day of oil to the market over time. That would return the country’s production level to where it was before the sanctions

The country sits on the world’s fourth-largest oil and first largest gas reserves, making it the world’s no.1 energy superpower.

Iranian oil ministry officials are confident of the country’s ability to increase production quickly. One senior official said earlier this month that most output could be restored within a month.