2015 Iranian Nuclear Deal: Iran's optimism gives the markets a sense of stability

 

Oil price in April

The arrival of Iranian crude oil, in ever increasing volumes, made a significant contribution to the rise in output by the OPEC+ in April, according to the sources in the Middle East.

In fact, it was so significant that the involuntary cuts and agreed production cuts made by the member of the block were completely countered by the amount of Iranian oil that got into the markets.

The analysts, however, do not believe it affected the dip in price this week, having risen for 6 successive weeks.

On the contrary, it is seen as a positive factor by the investors: it’s an indication that Iran may come out of its closet, giving the region much-needed political stability, earlier than they thought; Iranian media, meanwhile, is optimistic about the prospect of some sanctions being lifted as the talks on the JCPOA, known as 2015 Iranian nuclear deal, continue in Vienna, Austria.

Although the other signatories to the deal show cautious optimism, the desire from both sides to make it work could eclipse the negativity surrounding the current talks. Who would have thought that the Iranians and the people involved in the deal coming to talks, a year ago?

Iran has moved away from the rigid position it held a few months ago on the 2015 nuclear deal and the US, meanwhile, shows some flexibility about easing sanctions on Iranian banking sector and of course, Iran’s inability to sell oil.

Both sides know very well that the stakes cannot be higher unless they strike a deal during the current talks. In this context, the talks will continue for some time on give-and-take basis, giving the crude oil markets a sense of stability in the volatile region of the Middle East.

Since the forecasts of growth in demand are pretty reliable, based on encouraging economic data from the US, China, Europe and even Japan, the arrival of Iranian oil is not going to cause a supply glut that some investors fear.

In this context, the fall in oil price this week is more to do with the situation in India – and to some extent, in Japan – than the fears of over-supply.

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