Iran talks that could sway 2022 global oil supply by 700,000 b/d to resume Dec 27

An eighth round of the Iran nuclear talks would start Dec. 27 as the US turns up the pressure to break a stalemate that represents a top oil supply risk for 2022.

EU envoy Enrique Mora said Dec. 23 that the next round would "define the way ahead," adding that it was "important to pick up the pace on key outstanding issues and move forward, working closely with the US."

S&P Global Platts Analytics now assumes the sides will reach an interim deal to freeze Iran's nuclear development and lift some US sanctions, increasing Iranian oil supply by an estimated 700,000 b/d from April to December.

That compares with Platts Analytics previous outlook in November that expected a framework deal and full sanctions relief to add 1.4 million b/d of Iranian supply in 2022.

"Risks of no deal are high, but a deal is still assumed given the Supreme Leader's past comments and Biden's desire for a diplomatic solution," said Nareeka Ahir, a geopolitical analyst for Platts Analytics.

'Not over yet'

The talks aimed at restarting the 2015 Joint Comprehensive Plan of Action -- that set restrictions on Iran's nuclear program in exchange for relief from US sanctions -- have stalled since June. The Trump administration reimposed sanctions on Iran's oil, petrochemicals, shipping and other sectors in 2018.

The Biden administration has taken a more aggressive stance with Iran as it attempts to break an impasse in the nuclear talks. Top US national security and sanctions officials visited Israel and the UAE in recent weeks as part of those efforts.

Shin Kim, Platts Analytics head of supply and production, said the uncertainty surrounding the Iran talks and whether the sides reach a deal represent the "top, top event" for oil markets in 2022, adding that risks of collapse were "growing by the day."

"There's been no progress, it's looking difficult," Kim said. "But it's not over yet. The history of how these deals work out is it doesn't look like it's going to work out until it does."

Kim said the no-deal scenario and an expected rising call on OPEC would test global spare oil capacity by mid-2022, potentially leaving no supply in case of disruptions elsewhere such as Libya, Nigeria or the US Gulf of Mexico during the Atlantic hurricane season.

The S&P Global Platts OPEC survey estimated Iran produced 2.5 million b/d in November, down 20,000 b/d from October. The US Energy Information Administration estimated Iranian production at 2.45 million b/d in November.

Iran's output averaged 3.79 million b/d in 2017, according to the Platts survey.