Iran talks would be crucial for oil prices

Abu Dhabi: The outcome of Iran nuclear deal on June 30 is going to be crucial for oil prices, an analyst said as the Islamic republic holds discussions with six global powers on the lifting of sanctions imposed following its controversial nuclear enrichment programme.

Daniel Ang, an analyst working for Singapore-based Phillip Futures, said oil prices would react accordingly to the speed at which Iranian crude would be allowed to flow out.

“A slower pace would suggest prices would only suffer a temporary fall, while a faster pace could have devastating effects on crude prices,” he said.

“I would think that the deal would be for Iranian crude to flow into the global market at a snail’s pace and would think that Iran’s crude flows would only be sanction-free by 2017.”

An important member of the Organisation of the Petroleum Exporting Counties (Opec), Iran has the world’s fourth-largest proven oil reserves after Saudi Arabia, Venezuela and Canada.

The country’s annual production is estimated to be about 2.8 million barrels per day.

Opec countries did not disclose what would be their strategy on Iran if sanctions are lifted by the end of the month.

Opec secretary-general of Opec Abdullah Salem Al Badri said after the meeting in Vienna on June 5 that they would look into the matter.

“It would be premature to talk about the situation. They have the potential and manpower,” he said at the press conference.

The Opec was attended by top Iranian officials including oil minister Bijan Zengeneh.

Meanwhile, a senior Iranian official has said that Tehran’s return to oil market after long-awaited sanctions relief would not make prices fall.

“Iran’s return to the market after the removal of sanctions will not cause a price decline, but the countries that have taken over Iran’s [share of the] market should cut their production in favour of a market equilibrium,” Iran’s national representative to Opec, Mahdi Assali said. He was quoted on the petroleum ministry’s website Shana.

He said Iran is currently exporting 1 million barrels per day of oil, which could increase by 500,000 barrels per day shortly after sanctions are lifted.

“In case the countries that have occupied Iran’s share in the market refuse to cut their production, Iran’s return to the market is likely to make prices fall and those countries would suffer because Iran’s exports will double and even if the prices are cut by half there would no financial loss for Iran,” said Assali.

Brent, the international benchmark for crude oil, was trading at $64.22 per barrel at around 3.53pm UAE time on Tuesday, an increase of 2.44 per cent.