Explained: How will lifting of sanctions on Iran impact crude oil prices?

Mini

The American sanctions on Iran prevent the Persian Gulf country from exporting its crude to the global markets. However, now that US-Iran talks are underway, chances are those sanctions would be lifted. If that happens, global crude oil market would be impacted significantly.

Explained: How will lifting of sanctions on Iran impact crude oil prices?
Crude oil prices have been steady over the past week as a possible resumption in supply from Iran continued to offset the hopes of demand recovering as economies across the globe, led by the US, start opening up.
The decrease in claims of unemployment benefits (in the US) was more than expected, US Labour Department said. And as travel reopens in the summer (on the backs of massive vaccination drive) in the US and Europe, crude oil demand may rise. Analysts expect the oil demand to rebound closer to 100 million barrels a day. Their combined effect kept investor optimism high throughout the week.
It was offset by analysts expecting the return of Iran oil to the market. Due to US sanctions, the Gulf country could not sell its oil in the global market.
However, the efforts to get those sanctions removed are underway.
Since April 2021, the US, Iran, and Europe are negotiating in Vienna to work out a roadmap for Tehran and Washington to simultaneously comply with the 2015 nuclear agreement. The 2015 agreement places limits on Iran’s nuclear activity in exchange for global powers lifting sanctions from the country.
The fifth and final round of talks over America's return to the agreement (it had withdrawn during Trump's regime) is currently underway. At the end of the fourth round of negotiations, officials had said the deal was ‘within reach’.
If the US lifts sanctions, it would permit the flow of substantial volumes of Iranian oil into the markets.
Analysts expect Iran to add some 0.5-15 million barrels of crude and condensate per day (BPD) to the market.
According to a report by EA Gibson Shipbrokers, an international shipbroker, Iran is holding 69 million-plus barrels at sea. On land, it has a fleet of 40 tankers, out of which, 29 are very large carriers. These carriers can hold a cargo of 2 million barrels each. The country also has eleven Suezmaxes that can hold half as much oil, the report added.
It is hard to be sure how big Iran’s floating stockpile is, as it is unclear how many ships they use and how full they are, Richard Matthews, head of EA Gibson Shipbrokers told in a report to Bloomberg.
Ramping the global supply, however, is not just a function of the number of barrels, but also the speed of their delivery.
“The timing and size of return of Iranian oil to the market are pivotal to projecting the trajectory of global inventories and crude oil prices,” Citigroup said in a note.
In theory, the barrels on the sea could reach buyers within a few weeks, but those on land may take longer, Matthew said. Whereas, Citigroup estimates that the country can deliver oil to major markets, including India and China, within 10-20 days.
Oil prices were majorly unchanged on Friday and demand-supply issues continued to offset each other. But, the prices were running up against a wall, experts said, referring to the technical charts that showed oil prices have hit resistance levels.
Iran’s return to the oil market may also prompt OPEC+ to stick to the current pace of easing oil supply curbs. The agency’s next meeting is scheduled for Tuesday, in which it will announce whether to keep the pace unchanged.
The Organisation of the Petroleum Exporting Countries, with Saudi Arabia at the helm, and Russia as an ally (OPEC+) in April decided to return to 2.1 million barrels per day of supply from May-July.
The decision came in the anticipation of rising global demand despite a second wave of infections wreaking havoc in India.
OPEC had slashed crude production last year when the pandemic crushed fuel demand across the world. The decision had thrown a lifeline to the global crude oil industry.

Market Movers

CompanyPriceChange%Loss
ONGC120.25 -4.85
Coal India146.40 -5.75
JSW Steel670.60 -25.75
NTPC113.55 -3.85
UPL808.00 -27.05
CompanyPriceChange%Loss
ONGC120.35 -4.65
NTPC113.55 -3.70
M&M784.85 -20.60
Power Grid Corp233.00 -6.70
Nestle17,678.30 -375.20
CompanyPriceChange%Gain
Adani Ports694.35 47.45
Bajaj Auto4,167.10 113.20
HUL2,482.90 65.20
Bharti Airtel538.75 10.10
Grasim1,480.75 22.55
CompanyPriceChange%Gain
HUL2,480.75 63.85
Bajaj Auto4,164.95 105.95
Bharti Airtel538.90 10.20
Bajaj Finserv11,998.00 179.95
IndusInd Bank994.90 10.65

Currency

CompanyPriceChng%Chng
Dollar-Rupee73.8600-0.2175-0.29
Euro-Rupee87.8770-0.4200-0.48
Pound-Rupee102.2970-0.9290-0.90
Rupee-100 Yen0.6699-0.0019-0.29