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Why should oil traders keep an eye on Iran even when the nuclear talks appear to be fruitless


The US and other powers in the world have not made much progress in reaching a new nuclear deal with Iran, but with data showing that the country’s crude production is at a nearly two-year high, traders cannot ignore the amount that Iran can replenish to global supplies.

“Iran’s export capacity is about 2 million barrels a day and it looks like the country is following the sanctions” by selling oil to Chinese buyers, said Manish Raj, chief financial officer of Velandera Energy. Manish Raj, CFO of Velandera Energy said. He believes Iran’s supply of an additional 1 million barrels per day is ready to hit the market soon after the former US President Trump’s sanctions are lifted.

In a monthly report released this week, The International Energy Agency said that despite US sanctions, Iran “opened up late last year” with its crude oil supply reaching 2.3 million barrels a day in March, the highest level in nearly two years.

The IEA said Iran’s oil shipments, including crude and condensate, fell to a “trickle” rate from 2.5 million barrels a day after the former Trump administration pulled out of the Action Plan. Joint Comprehensive (JCPOA) in 2018 and imposing sanctions instead.

“However, China has never completely stopped its purchases,” the agency said, noting that the estimated Iranian oil sales to China for the fourth quarter of 2020 were 360,000 bpd, This is up from an average of 150,000 barrels per day shipped in the first nine years. month of last year. In March this year, exports to China were estimated at 600,000 barrels / day.

And “the big sales seem to be continuing” as Washington and Tehran re-started indirect negotiations in early April to revive the 2015 JCPOA, the IEA said.

Read: What Iran nuclear talks mean for oil prices

Discussions regarding the deal, aimed at preventing Iran from developing nuclear weapons, were held on Thursday in Vienna. A tweet from Mikhail Ulyanov, Russia’s Ambassador to the United Nations, said “the overall impression is positive” after Thursday’s joint committee meeting of the JCPOA.

The IEA said in its report that “if negotiations are successful and sanctions are eased, up to 1.5 [million barrels a day] the additional amount of Iranian crude oil could return to the world market in a relatively short time ”.

However, discussions have been complicated by Iran’s decision earlier this week to enrich uranium at 60% purity following a attack on its Natanz nuclear site, which they have blamed on Israel. That brings Iran closer to 90% of the purity required for weapons grade materials.

Analysts at RBC Capital Markets wrote in a research report: “If Iran continues to keep its fire in the face of mysterious attacks on critical infrastructure and personnel, we still believe that The good news is that the nuclear deal can be revived and sanctions lifted. The forth day.

They said the next two weeks would be a “pivotal moment” for the short-term fate of the Iran nuclear deal, as the deal-resuming window is closing as Iran’s election season is fast approaching. The country will hold a presidential election in June.

If the discussions fail, “there could be some disappointment that could have a minor impact on the oil market, although it does not seem likely to lose the market for Iran’s current exports. “, Says MarshallLESves, energy markets analyst at IHS Markit.

“Instead, the question is whether extension negotiations could lead to an increase in exports at some point this year,” he told MarketWatch. “We’re not really bullish on pricing at this point yet and I think most of them are using a wait-and-see approach.”

Oil prices rose on Thursday, with June Brent crude oil
BRNM21,
-0.24%

BRN00,
-0.24%

up 36 cents, or 0.5%, to $ 66.94 / barrel on ICE Futures Europe. May West Texas Crude Oil Intermediate
CLK21,
+ 0.21%

CL.1,
+ 0.21%

ended at $ 63.46 per barrel on the New York Mercantile Exchange, up 31 cents, or 0.5 percent. Both crude oil benchmarks hit their highest levels since March 17, according to Dow Jones Market Data.

Although the outlook seems “now a shortcut”, the enactment of sanctions could “open up” opportunities to export an additional 1 million barrels a day, Dietves said.

Unless others in the Organization of Petroleum Exporting Countries make up for that increase, he said, “it could put pressure on prices.” Then again, if demand increases rapidly at that point, “it can be absorbed if the rate of increase in demand exceeds the increase in the additional supply.”



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