The markets point to an agreement between the US and Iran

The prospects for a relaunch of the Iranian nuclear deal have changed dramatically, from almost certain in March 2022 to almost zero by the end of the year and are currently placed in the middle.

While the prospects for a deal to be signed anytime soon appear dim, relations between Washington and Tehran have warmed markedly, with the Biden administration unfreezing frozen assets and perhaps even allowing uranium enrichment by of Iran.

The US administration may not admit it outright, but it has looked the other way and allowed Iranian oil sales to hit record highs – obviously happy to keep markets awash in an effort to keep oil prices down.

Iranian crude exports exceeded 1.5 mb/d in May , the highest level since 2018, despite the country still being subject to US sanctions. Tehran says it has ramped up crude output to more than 3 million barrels a day, again its highest level since 2018. All that oil from Iran is certainly playing a role in keeping markets freer than the Saudi Arabia and OPEC could hope. Right now Iran is Biden's biggest ally, albeit for its own sake.

Earlier, reports had surfaced that the United States and Iran were making progress after talks on a nuclear deal resumed, a move that could ease sanctions on Iranian oil exports. The Israeli newspaper Haaretz reported that the talks are progressing faster than expected, with the possibility of an agreement being reached within weeks. Terms of the deal are likely to include Iran ceasing its uranium enrichment activities at or above 60 percent in exchange for being allowed to export up to 1 million barrels a day of oil.

A successful nuclear deal could change oil markets, with former Iranian oil minister Bijan Namdar Zanganeh saying his biggest dream has always been to boost Iranian oil production to six million barrels a day; earn $2 trillion through oil exports over the next two decades and use the income to invest in the country's development.

An agreement may not be absolute and all-encompassing, but be limited to specific fields, thus making it more attractive to both parties. For example there could even be a partial acceptance of the legitimate role of the Revolutionary Guards in exchange for a limitation in the development of uranium enrichment. It always remains to be assessed how serious and acceptable this agreement would be to all players, such as Israel.

Current Iranian production is significantly below the 2018 peak of 3.7 mb/d. However, increasing production from the current level to close to 6 mb/d could take at least several years due to years of underinvestment.

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The articleThe markets point to an agreement between the US and Iran comes from Scenari Economici .

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This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/i-mercati-puntano-a-un-accordo-fra-usa-e-iran/ on Sat, 26 Aug 2023 07:00:14 +0000.