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Iran is preparing to return to the oil market as talks in the US progress

(Bloomberg) – Iran prepares to ramp up global oil sales as talks to lift US sanctions show signs of progress. But even when a deal is struck, the supply of additional crude oil to the market can be gradual. State-controlled National Iranian Oil Co. has prepared oil fields – and customer relationships – so that it can increase exports if an agreement is reached. officials said. By the most optimistic estimates, the country could return to production of nearly 4 million barrels per day before the sanction in just three months. It can also drain a flotilla’s oil that is hoarded in storage, but there are many hurdles to overcome. Any agreement must completely dismantle all US trade, shipping and insurance barriers involving Iranian entities. Even then, according to Mohammad Ali Khatibi, a former official at the NIOC, buyers may be reticent. “Our return may be a gradual process rather than quick and sudden – it cannot happen overnight,” said Khatibi, Iran’s former OPEC envoy. , said in an interview. That’s partly because the coronavirus pandemic “has damaged demand significantly,” he said. The pace of Iran’s return could be critical to the oil market. While fuel economy is recovering as governments distribute vaccines and reopen major economies, it remains under pressure from lockdowns and new virus outbreaks. Additional Iranian supplies would put a burden on other members of OPEC +, who have struggled for more than a year to remove an abundance that has built up as the pandemic spreads. and Iranian diplomats, currently negotiating through intermediary governments in Vienna, have indicated that an agreement is within reach. If successful, the negotiations could reactivate a 2015 international nuclear deal from which Donald Trump withdrew the US three years later. That would require Iran to once again accept restrictions on its nuclear activities in exchange for lifting a series of harsh sanctions imposed by the former president. Tehran has already benefited from a less hostile climate since President Joe Biden took power in January. . . It boosts petroleum sales and sends more crude oil to encouraged Chinese buyers. Iranian production is up nearly 20% this year to 2.4 million barrels per day, according to data collected by Bloomberg, although most of that oil is still used domestically. “Even if the sanctions are not lifted, it depends on their ability to sell oil in the gray market, they will further increase their production,” said Sara Vakhshouri, president of SVB Energy International LLC in Washington. At NIOC, crude oil production has rotated between different fields to maintain adequate reservoir pressure, company officials said, who asked not to be identified. South of the country play a similar role, SVB’s Vakhshouri said: if there is a deal with the US, the Islamic Republic could increase production to nearly 4 million barrels per day in three to six months, SVB’s Vakhshouri told Iman Nasseri. , Middle East General Manager at consultant FGE, who has decades of experience in the region and worked in Iran. n a slower pace. It would take 12 to 15 months after sanctions were lifted to increase production to 3.8 million barrels per day, Reza Padidar, head of the energy committee of the Tehran Chamber of Commerce, said in an interview. Some of the work required to restore capacity on fields, such as removing and maintaining blocked borehole pumps, can take up to a month per well, he said. China Stockpiles Even before more oil is pumped, Iran could boost its sales. FGE’s Nasseri estimates that the country has stored about 60 million barrels of crude oil. About 11 million barrels of that, plus another 10 million barrels of a light oil called condensate, are stored in China, where it is ready to be sold to refineries, according to FGE NIOC officials say they have been in contact with customers, who are willing to resume purchases based on regular contracts. An Iranian restart poses complications for the Organization of Petroleum Exporting Countries and its allies. Led by Saudi Arabia and Russia, the coalition of 23 countries is gradually restoring oil production that was scaled back last year when the coronavirus crisis hit demand. The cautious approach to increasing inventories has helped Brent crude oil prices rise 33% this year to nearly $ 69 a barrel. Saudi Energy Minister Prince Abdulaziz bin Salman has indicated that the alliance will make room for Iran to boost production, as in the past. It’s unclear if others, including countries looking to revive manufacturing like Russia and the United Arab Emirates, would be so accommodating. But that may not be necessary. Difficult talks With Tehran and Washington still haggling to get the best terms, a deal could take a lot longer. As the recent clashes in the Persian Gulf between US and Iranian naval ships escalate, this could slip away altogether. Talks could also be affected by next month’s elections in Iran, after which President Hassan Rouhani resigns. While supreme leader Ayatollah Ali Khamenei has backed the negotiations so far, Rouhani’s successor may take a tougher stance on the US. Even if the sanctions are lifted, Iran faces other problems. Many refineries sign annual contracts at the beginning of the year, leaving Tehran with little leeway to sign its own long-term supply agreements for the time being, Khatibi said. “Our main concern is the restrictions placed on our customers and their fears of buying oil from Iran,” he said. “As the end of the year approaches, we will see more futures contracts coming.” Trump’s sanctions ” Stifled Iran’s relations with traditional customers, including India, China, South Korea, Japan and Turkey, to a greater extent than previous trade. Restrictions, said Padidar of the Tehran Chamber of Commerce. For Wall Street banks such as JPMorgan Chase & Co. and trading houses such as Vitol Group, the oil market is recovering quickly enough to comfortably absorb additional Iranian barrels. Rising demand for travel will boost consumption in the second half. “There is room for oil from Iran to return” said Mike Muller, Asia Director of Vitol Group, the world’s largest independent oil trader. “It won’t come back in one fell swoop.” (Fourth paragraph updates with analyst details and oil prices.) Visit us for more of this so ort articles at bloomberg.com. Subscribe now to stay up to date with the most trusted business news source. © 2021 Bloomberg LP

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