Step by step, month by month, the agreement between Iran and the international powers to control nuclear development in the country is moving forward. Beyond the rhetoric about whether the deal will be effective or not — a debate that will surely continue — the prospect of an end to some of the sanctions on Iran comes closer. What could that mean for the oil market?
The question has to be answered in two parts. First, the short term up to the end of 2016. Second, the longer term stretching to 2020 and beyond. On the first there is a clear consensus across the industry. Iran can produce and export perhaps another 400,000 barrels a day by the end of next year. The limit is set by the condition of existing fields and infrastructure. In the latest of a series of excellent and detailed papers, the US Energy Information Administration suggests the number could be a little higher but also cautions that the amount of condensate available may not be exportable because the market is saturated. That number of barrels a day would add a further dampener to the world price and might force producers in the US to shut in some more tight oil. It is not enough to change the game. Read more