A file photo of oil production. Photograph:( Reuters )
Iran sits on the world’s fourth-largest oil reserves and relies heavily on oil revenues. If and when the administration of US President Joe Biden and the Iranian government agree a deal that results in the lifting of sanctions, Iran plans to increase output to 3.8 million barrels per day (bpd) from the current 2.1 million bpd, according to oil ministry officials
Iran could quickly export millions of barrels of oil it is holding in storage if it reaches a deal with the United States on its nuclear programme and has been moving oil into place to prepare for an eventual restart, Reuters news agency reported citing traders and industrial sources.
The US and Iran began in mid-June their sixth round of indirect talks on reviving a 2015 nuclear deal that former US President Donald Trump pulled out of in 2018. Trump reimposed sanctions on Iran’s energy sector, leading refiners in many countries to shun Iranian crude and forcing Tehran to pump well below capacity.
Iran sits on the world’s fourth-largest oil reserves and relies heavily on oil revenues. If and when the administration of US President Joe Biden and the Iranian government agree a deal that results in the lifting of sanctions, Iran plans to increase output to 3.8 million barrels per day (bpd) from the current 2.1 million bpd, according to oil ministry officials.
That would return the country’s production level to where it was before the sanctions, but would take time because of years of low investment in mature oilfields and heavily reduced output.
As a stopgap measure while it works on boosting production, the National Iranian Oil Company (NIOC) is expected to export from onshore and offshore storage that contains as much as 200 million barrel, according to energy consultancy and monitoring firms.
This could allow the country to export an extra 1 million bpd, or 1% of global supply, for more than six months.
"Iran will be using its nearly 60 million barrels of crude inventory, of which 30-35 million barrels are built during the past two years, within a few months of sanctions removal," said Iman Nasseri, managing director for the Middle East with FGE consultancy.
An increase of 1 million bpd of Iranian crude would put downward pressure on benchmark global oil prices, but investment bank Goldman Sachs said last month that the global oil market should be able to absorb the additional supply relatively quickly.
Fuel demand is rising as global economic activity recovers from the impact of the COVID-19 pandemic, and OPEC producers and their allies have been cautious about increasing supply to the market in part to avoid a shock should Iranian supply return.
"From a macro perspective, a return of Iranian barrels to the market should not derail OPEC+ intentions to gradually increase production as long as demand in Europe and the United States continues to recover," said Florian Thaler, the CEO and co-founder of consultancy OilX.
Iran has boosted the volume of crude it has stored on oil tankers in recent months, according to data intelligence firm Kpler, in what may be a preparation for a restart to exports. Some of those tankers are already in Asia, historically the biggest market for Iran’s oil.
"We currently estimate around 78 million barrels of oil and condensate are stored on water and this compares against only 41 million barrels at the same time last year," said Homayoun Falakshahi, a senior analyst at Kpler.
"A lot of tankers are already parked close to East Asian markets, so it could be a question of days," he added.
(With inputs from agencies)