Iran-US Talks Influence Oil Market
Iran and the USA are in the final stages of negotiations on Iran's nuclear program. After several weeks of intense negotiations, Iran and the United States are closer than ever to an agreement.
At the same time, news leaked to the market about preliminary talks between Iran and Asian refineries on the resumption of oil supplies in the event of a successful nuclear deal.
China has already made the first official purchases of Iranian oil in January 2022. Negotiations are also underway between Iran and refineries in India, South Korea and Japan. According to a Reuters, if the nuclear deal is nevertheless concluded, after that it may take 2-3 months to resume purchases of oil from Iran from the Japanese refinery.
It should be noted that the conclusion of a nuclear deal implies the lifting of sanctions on the export of Iranian oil which will potentially enable Tehran to increase production. At the moment, compared to pre-sanction levels of oil production in 2018, Iranian production is 1.3 million barrels per day lower. According to experts, in the event of a positive completion of the negotiations, most of these volumes can be returned to the market by the end of 2022. By December, Iran will be able to increase production by 0.9 million barrels per day, which corresponds to about 0.9% of total world demand. This volume could raise the estimate of a surplus in the oil market in 2022 by 0.3-0.4 million barrels per day, to 1.6-1.7 million barrels per day. This can significantly affect prices given the inelasticity of the market.