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Iran gears up to return to oil market as US talks advance

(Bloomberg) – Iran prepares to increase global oil sales as negotiations to lift U.S. sanctions show signs of progress. But even if a deal is struck, the flow of additional crude into the market may be gradual. The state-controlled National Iranian Oil Co. has primed the 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 pre-sanctions production of nearly 4 million barrels per day in as little as three months. It could also harness the value of a flotilla of stored oil, but there are many hurdles to overcome. Any agreement must completely dismantle the range of US barriers to trade, navigation and insurance involving Iranian entities. Even so, buyers may still be reluctant, according to Mohammad Ali Khatibi, a former NIOC official. , said in an interview. This is in part because the coronavirus pandemic has “drastically affected demand,” he said. The pace of Iran’s return could prove critical to the oil market. While fuel consumption is rebounding as governments distribute vaccines and major economies reopen, it remains depressed by lockdowns and new outbreaks of the virus. Additional Iranian supplies would place a burden on other members of OPEC +, which has worked hard for more than a year to eliminate a glut that has built up as the pandemic spread. and Iranian diplomats, currently negotiating through intermediate governments in Vienna, signaled that a deal was within reach. If successful, the negotiations could reactivate a 2015 international nuclear deal from which Donald Trump withdrew the United States three years later. This would force Iran to once again accept the limits of its atomic activities, in exchange for the lifting of a set of severe sanctions imposed by the former president. President Joe Biden came to power in January. . It revives oil sales, sending more crude to emboldened Chinese buyers. Iranian production has climbed nearly 20% this year to 2.4 million barrels per day, according to data compiled by Bloomberg, although most of that oil is still used domestically. the gray market, they will further increase their production, ”said Sara Vakhshouri, president of consultancy firm SVB Energy International LLC in Washington. , who asked not to be identified. The procedure is crucial to maintain production levels. Gas injections into former oil fields in the south of the country play a similar role, SVB’s Vakhshouri said. If there is a deal with the United States, the Islamic Republic could increase production to nearly $ 4 million. barrels a day in three to six months, according to Iman Nasseri, managing director for the Middle East at consultant FGE, who has decades of experience in the region and has worked in Iran. Others expect a slower pace. It would take 12 to 15 months after the sanctions were lifted to increase production to 3.8 million barrels per day, said Reza Padidar, head of the Tehran Chamber of Commerce’s energy committee, said in an interview. Some work needed to restore the capacity of fields, such as removing and maintaining clogged borehole pumps, can take up to a month per well, he said. FGE’s Nasseri estimates the country has stored around 60 million barrels of crude. About 11 million barrels of this product, plus an additional 10 million barrels of a light oil called condensate, are stored in China, where it is ready to be sold to refiners, according to FGE. are willing to resume purchases on regular contracts. An Iranian restart poses complications for the Organization of the Petroleum Exporting Countries and its allies. Led by Saudi Arabia and Russia, the 23-country coalition is gradually restoring oil production it cut last year when the coronavirus crisis hit demand. Its cautious approach to increasing supplies has helped Brent prices climb 33% this year to nearly $ 69 a barrel. It’s unclear whether others, including countries keen to jumpstart production like Russia and the United Arab Emirates, would also be accommodating. But they may not need to be. If the recent clashes in the Persian Gulf between US and Iranian ships escalate, they could disappear altogether. The 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 so far endorsed negotiations, Rohani’s successor could take a tougher stance against the USE Even if sanctions are lifted, Iran faces other issues . Many refiners sign annual contracts at the start of the year, leaving little room for Tehran to make its own long-term supply agreements for now, Khatibi said. “Our biggest concern is the limitations placed on our customers and their fear of buying oil. from Iran, ”he said. “As the end of the year approaches, we’ll see more futures happen.” Trump’s sanctions have “stifled” Iran’s relationships with traditional customers, including India, China, South Korea, Japan, and Turkey, to a greater extent than previous trade. For Wall Street banks like JPMorgan Chase & Co. and trading houses like Vitol Group, the oil market is recovering quickly enough to comfortably absorb additional Iranian barrels. “There is room for the return of Iranian oil,” said Mike Muller, Asia head of Vitol Group, the world’s largest independent oil trader. “He won’t come back all at once.” (Updates to fourth paragraph with details on analysts and oil prices.) 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