Washington — Iran has made it abundantly clear that President Hassan Rouhani will not meet his US counterpart Donald Trump without some offer of oil sanctions relief, a precondition the White House has insisted publicly it will not consider.

Yet many analysts still see a meeting between the two leaders later in September in New York during the UN General Assembly as a possibility, even if the get-together may lead to little else beyond a photo and a temporary drop in oil prices.

"You'd have that initial, sharp selloff," said Helima Croft, global head of commodity strategy for RBC Capital Markets. "But what's the point of a photo op if there is no breakthrough? It seems to me that some form of sanctions relief is critical for anything material to the oil market."

Henry Rome, an Iran analyst with the Eurasia Group, puts the likelihood of a Trump-Rouhani meeting at about 30% probability. S&P Global Platts Analytics puts the odds of talks below 50%.

"Despite the hardline rhetoric coming from Rouhani at times, there is enough behind-the-scenes negotiating to suggest that a Trump-Rouhani encounter on the sidelines of [the UN General Assembly] is possible," said Scott Modell, managing director with Rapidan Energy Group.

Still, not everyone is convinced. The Trump administration has kept up its rhetoric toward Iran, stepping up sanctions yet again this week, amid a threat by Tehran to further scale back its nuclear commitments if Europe does not provide a $15 billion credit line or pledge to purchase Iranian oil in the coming days.

Joe McMonigle, an analyst with Hedgeye Risk Management, said a meeting between Trump and Rouhani was "highly unlikely," as long as Iran was demanding sanctions relief as a prerequisite.

"Almost zero probability," McMonigle said.

MAXIMUM PRESSURE

During a press conference Wednesday, Brian Hook, the US Department of State's special representative for Iran, adamantly refuted the notion that the US was considering either sanctions relief for Iran, or supporting a French proposal to extend a $15 billion credit line to Iran.

"We can't make it any more clear that we are committed to this campaign of maximum pressure, and we are not looking to grant any exceptions or waivers," Hook told reporters.

Iran has insisted on the $15 billion lifeline from Europe as a condition for remaining in full compliance with the nuclear deal, setting a deadline of Saturday.

France, the UK, Russia, China, Germany and the EU remain in the nuclear deal, under which sanctions crimping Iran's oil sales are suspended in exchange for nuclear concessions, but the US' withdrawal earlier this year and reimposition of its sanctions have effectively closed off almost all avenues for Iranian exports.

Iranian shipments of crude fell to about 210,000 b/d in August, according to S&P Global Platts analysis of shipping data, down from about 2.5 million b/d in June 2018.

Rouhani said Wednesday that bilateral talks with the US would not take place unless the US "lifts all of its sanctions," according to a speech broadcast on state television.

RBC Capital Markets' Croft said that in order for the talks to take place, the US would likely need to send back channel signals to Iran that it is willing to provide tangible sanctions relief to Iran. This could include waivers that would allow Iran to legally export about 700,000 b/d of crude, she said.

"That might be a way to get a temporary truce ... but it's unclear if that offer will ever get put on the table," Croft said.

McMonigle with Hedgeye said such an offer was unlikely even being considered.

"The US strongly believes it has leverage with sanctions that are now having a major impact on Iran," he said.

Kevin Book, managing director with ClearView Energy Partners, said that even if Trump and Rouhani meet in New York, "it would not necessarily indicate any sort of deal."

In a note, Platts Analytics said any comprehensive deal between the US and Iran on sanctions relief was unlikely before the November 2020 US presidential election, with Trump having campaigned heavily in the lead up to the 2016 election on a pledge to withdraw from the nuclear deal.

SANCTIONS RELIEF

Platts Analytics forecasts that if Iran received full sanctions relief, its output could increase by at least 1 million b/d within a few months, although uncertainty remains over the conditions of Iranian fields. Much of the additional 1 million b/d, accounting for all the disrupted production from the full reimposition of US oil sanctions, could be completed within a year, according to Platts Analytics.

Rapidan's Modell said he expects some type of sanctions relief by the first quarter of 2020 and an increase of 500,000 b/d in Iranian crude exports next year, although that largely depends on Trump supporting the French $15 billion credit proposal.

"Even if the US would not characterize support for such a proposal as sanctions relief, it would ultimately achieve the same thing - more Iranian oil on the market in which goods, not cash, flow back to Tehran, geopolitical risk in the Middle East goes down, and Trump gets to spend more time focusing on his reelection," Modell said.

Iran, for its part, says it can return to pre-sanctions crude production within three days of sanctions being lifted. Iran pumped 2.30 million b/d in August, according to the latest Platts survey of OPEC production, compared with 3.83 million b/d in May 2018, when Trump first announced his intent to withdraw from the nuclear deal and reimpose US sanctions.

-- Brian Scheid, brian.scheid@spglobal.com

-- Herman Wang, herman.wang@spglobal.com

-- Aresu Eqbali, newsdesk@spglobal.com

-- Edited by Keiron Greenhalgh, newsdesk@spglobal.com