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A "main agreement" has been made to reinstate the nuclear deal, as the US has broadly committed to lifting its sanctions targeting Iran's oil, petrochemical and shipping sectors, Iranian President Hassan Rouhani said May 20.
But a final deal has yet to be struck, with discussions ongoing over various details, Rouhani said on state television.
"The main issues, oil sanctions, petrochemical sanctions, shipping sanctions, insurance and so on and so forth, Central Bank and banks, they have agreed on these all," Rouhani said, referring to the US. "These have been wrapped up. It means we have taken the main and big step. The main agreement has been made. There are some cases under discussions yet to reach the final agreement."
Brent crude oil futures dropped to $65.26/b immediately after the news, down 2.1% or $1.40/b against the May 19 close.
US, Iranian and European negotiators this week wrapped up a fourth round of indirect talks in Vienna over the deal, known as the Joint Comprehensive Plan of Action.
US officials could not immediately be reached for comment. In a briefing with reporters May 19, US State Department spokesperson Jalina Porter said a fifth round would convene next week, but had no details on progress towards an agreement.
The US has insisted that Iran bring its uranium enrichment activities back into compliance with the original terms of the JCPOA before any sanctions relief is granted, while Iran has pressed for non-nuclear sanctions targeting its banking and insurance sectors to be lifted.
"These last few rounds of discussions have been helpful to crystallize the choices that need to be made by both Iran as well as the United States in order to come back into a mutual return to the compliance of the JCPOA," Porter said.
However, a US Department of State spokesperson insisted on May 20 that "many challenges" remain.
"As we have said, any substantial move by the US would have to be part of a process in which both sides take actions, and there are many challenges remaining," the spokesperson said in a statement. "The precise nature of the sanctions-related steps that the United States would need to take to achieve this objective is a subject of the talks."
Abbas Araghchi, Iran's top negotiator, said May 19 that delegates would return to their capitals over the weekend for final consultations with their leaders.
"We can now say that we've reached the framework and structure of an agreement. The main text and annexes have been prepared [but] of course, negotiations over the text have not finished," he said on state television. "Many paragraphs of this agreement are still being negotiated. Some of the key issues are still a matter of difference and no agreement has been made over them."
Parties to the deal face a soft May 21 deadline, when an agreement between Iran and the UN on monitoring nuclear activities is set to expire, though Iran has indicated a willingness to extend it.
Then-President Donald Trump withdrew the US from the JCPOA in 2018, reimposing the sanctions, which have severely constrained Iran's oil production and exports.
Iran pumped 2.43 million b/d of crude in April, according to the latest S&P Global Platts survey of OPEC output, down from its pre-sanctions production of between 3.8 million-3.9 million b/d.
But that April figure is a significant rise from about 2 million b/d at the end of 2020, as Iran has found more buying interest from China, according to market sources.
It is plausible Iran could ramp up to production capacity in early 2022, said Matt Reed, vice president of Foreign Reports, a Washington-based consulting firm focused on Middle East oil politics.
If a deal is reached in late May or June, then verification would continue through August, setting the stage for sanctions relief in late summer, Reed said, with exports increasing through the end of 2021 and hypothetically peaking in the first quarter of next year.
"If OPEC is right about a robust demand recovery in the second half of 2021, then Iran's return might be perfectly timed in a way that's less disruptive," Reed said. "There will be winners and losers in certain markets, for sure, as Iran tries to claw back lost market share. But it's less of a headache for OPEC+ if the demand is there to soak up Iranian barrels."
That timing really is critical, agreed Jamie Webster, senior director at Boston Consulting Group's Center for Energy Impact in Washington.
"Iran's return to the market last year at this time would have been a disaster, but with demand starting its post-COVID boom, this is one of those few times you could put a big chunk of new supply into the market with minimal disruption," Webster said.
Iran's heavy sour grades compete directly with crudes such as Saudi Arabia's Arab Heavy, Arab Light and Arab Medium; Iraq's Basrah Light, Basrah Medium and Basrah Heavy; Russia's Urals; the UAE's Upper Zakum; Oman Crude Blend; Kuwait Export Crude; Venezuela's Mesa 30 and Merey 16; and Mexico's Mata, among others.
Iran also produces and exports ultra-sweet low sulfur oil or condensates, especially from South Pars, which is similar to condensates produced by Norway, Qatar, the US and Australia.