What Would an Iran Deal Mean for Oil Markets?

A last-ditch attempt by Europe to revive the Iranian nuclear deal has made people think that millions of barrels of oil are going to flood world markets. If Tehran is any guide, the return could be quick.

Iran could raise supply by hundreds of thousands of barrels a day by the end of the year if an agreement is reached. The tight global market has been hurt by Russia's invasion of Ukrainian.

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Iran's crude output was restored more quickly than analysts had predicted. It may be possible to repeat that feat with no evidence of damage. 100 million barrels of crude and condensate can be immediately released to the market by the Persian Gulf nation.

The European Union is consulting the US on a way ahead after Iran responded to a final proposal to revive the 2015 accord. The plan to limit Iran's nuclear activity is seen as the last hope of saving the deal.

The prospect of a quick return of Iranian supplies has helped keep benchmark crude below $100 a barrel this month, a level it has mostly exceeded since the start of the Ukrainian war.

About 40 million to 45 million of the 100 million barrels of oil in storage are crude and the rest are condensate, a light oil that is pumped out together with gas.

Once stored oil is released, the bigger challenge will be reviving oil fields and arranging the contracts and insurance to ship those barrels. Despite being shut out of global trade, Iran has maintained many of its fields and customer relationships.

Within three months of sanctions being lifted, the country could add as much as 900,000 barrels a day of production.

Iran is currently producing 2.5 million barrels of crude. It took about a year to get back to full capacity after the 2015 deal. Donald Trump withdrew from the agreement.

The pace of Tehran's oil comeback will be closely watched, with fuel demand recovering from the Pandemic, Russian supplies being boycotted by multiple buyers, and most of Iran's fellow members struggling to boost output.

The talks with world powers have dragged on for almost 18 months due to political squabbles over terrorism sanctions, Iran's demands for guarantees the US won't again renege on the deal, and Russia's war on Ukraine. The agreement is not certain.

There are sticky issues holding up a new Iran nuclear deal.