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Iran expects 2.5 mil b/d exports after US sanctions removal as Vienna talks continue

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Iran expects 2.5 mil b/d exports after US sanctions removal as Vienna talks continue


Iran's top envoy indicates tacit deal reached on oil sanctions removal

Tehran wants all sanctions lifted before discussing nuclear pact with US

Iran's exports are rising despite US sanctions

  • Author
  • Aresu Eqbali and Dania Saadi
  • Editor
  • Claudia Carpenter
  • Commodity
  • Oil
  • Topic
  • US-Iran tensions

Tehran — Iran expects to export as much as 2.5 million b/d of crude after the removal of US sanctions as the third round of talks between Tehran and some signatories to the nuclear agreement concluded in Vienna amid hopes of Washington removing oil sanctions on Tehran.

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"Oil sales have dropped much. But the conditions are better now and we are more in control of the situation," Vice President Eshaq Jahangiri was quoted as saying May 1 by oil ministry news service Shana. "We have the possibility to increase oil exports up to 2.5 million barrels of oil after removal of the sanctions."

Iran, an OPEC member whose oil exports have dwindled since the re-imposition of US sanctions in 2018, began in April indirect talks with the US in Vienna amid hopes for Washington to rejoin the 2015 Joint Comprehensive Plan of Action nuclear deal. The third round of talks between the remaining members of the nuclear deal -- Iran, Russia, China, France, Britain and Germany -- concluded on May 1 and are expected to resume at the end of this week. The 2015 agreement waived sanctions on Iran's oil sector in exchange for restrictions on its nuclear activities.

Iranian exports have surged markedly since the November US presidential election of Joseph Biden, who made a campaign pledge to reverse course on US policy toward Tehran, which was hardened with sanctions under former President Donald Trump.

S&P Global Platts Analytics estimates Iran's crude and condensate exports averaged 825,000 b/d in Q1 2021, up from 420,000 b/d in Q3 2020.

Oil sanctions agreement

Positive steps on nuclear talks last week point to an accelerated timeline for sanctions relief, according to Platts Analytics.

"Our reference case forecast for a framework deal by the summer and full sanctions relief by Q4 2021 will likely be revised to end-May and end-September, respectively," Platts Analytics said in a recent note.

Talks between the US and Iran on sanctions relief could mean crude production will be 2.95 million b/d by December 2021, according to Platts Analytics.

The US sanctions have severely hamstrung Iran 's crude production, which averaged 2.3 million b/d in March, according to the latest Platts survey of OPEC output. That is up from a 30-year low of 1.90 million b/d last summer, but still far shy of the nearly 4 million b/d it produced prior to the sanctions.

Iran's top negotiator for a nuclear deal indicated that there is a tacit agreement to lift all US sanctions, including oil. Tehran has insisted on the removal of all US sanctions before a deal is concluded.

"We insist that sanctions... on Iran's energy or the automotive industry, insurance and ports should be removed. And there is agreement on this part too," Iran's deputy foreign minister Abbas Araghchi was quoted as saying by state-run IRNA news agency.

Cautious optimism

Biden is hoping to strike a deal with Tehran before Iran's June presidential elections, which hardliners are likely to win.

Mikhail Ulyanov, Russia's envoy to the talks, sounded cautious optimism on the outcome of the Vienna talks in a Twitter post on May 1.

"It's to early to be excited, but we have reasons for cautious and growing optimism," Ulyanov said on Twitter.

"There is no deadline, but participants aim at successful completion of the talks in approximately three weeks."

The fact that Iran has already cranked up not just its crude but also its oil product exports and not just to China but elsewhere as well indicates that the market is ready for the increment from Tehran and is priced in, Mike Muller, head of Vitol Asia, told a Gulf Intelligence webinar May 2.

"Of course there is a lot of spare capacity left in OPEC, but if managed prudently, I think there is space for oil from Iran to return because it won't come back in one big bang," Muller said. "Even if it was happening right now today, probably you won't see a huge amount of Iranian oil before the month of July because everyone has bought enough oil for June already."

The level of "let's just say, scrutiny and clamping down on exports of barrels that are sanctioned to most and seem to be going beyond China has already been happening and therefore maybe the impact on products may be less severe than some people expect and I would caution that the impact on crude won't be perhaps as large as some expect either," Muller said.

"I think the market is ready for it. I think the market is pricing it already to a certain extent."