Arrival of Iranian oil to the markets: investors show no panic - for a reason

 

Iranian oil

Crude oil markets are bracing themselves for the arrival of Iranian oil in proportion to the growing positive sentiments, both in Vienna and Tehran about a potential, mutually-acceptable solution to the JCPOA, 2015 Iranian nuclear deal.

The talks that entered the 5ths phase had been going on for weeks with mounting challenges; there were even diplomatic whispers about an imminent breakthrough, about a week ago.

The prospect, however, had a setback when a conflict between Israel and Hamas broke out, a few days ago. Although Iran, a sworn enemy of Israel, made its feeling known on international stage, it refrained from making any move to fan the raging conflict.

Nor could it let masses to fill the streets for protest in light of the Coronavirus infections.

Although the US and Iran do not physically participate in the ongoing talks, it goes without saying who pulls the strings in shaping the ultimate outcome of the discussions; the intermediaries facilitate in bridging the significant gap of understanding between the two nations, that has been growing for decades.

The oil sector in Iran has been in full swing in the hope that the US-led sanctions will be lifted anytime soon; it has been hoarding away the excess that they could not export due to heavy sanctions.

Analysts believe if the sanctions are lifted, Iran can supply the crude markets with over 4 million barrels a day – a significant output.

In theory, this could lead to a dip in oil price; since Iran is a member of the OPEC+, it has contractual obligations to stick to and in that context, flooding the markets will not be any member’s interest. That means Iran may gradually increase its output without causing chaos in the markets.

Iran is fully aware of the stakes despite it being in need of earning urgent cash to bolster its economy.

This is the reason behind markets not showing an unnecessary anxiety over Iranian oil arrival; the moves to normalize relations between Iran and Saudi Arabia will be crucial too for Iran to striking a balance when it comes to sale of crude oil without upsetting the new-found equilibrium in the sector.

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