Return of Iranian oil export to raise competition between OPEC members

Oil&Gas Materials 16 March 2015 17:29 (UTC +04:00)

Baku, Azerbaijan, March 16

By Aygun Badalova - Trend:

Return of oil exports from Iran will increase competition between OPEC members, most dramatically in Asia pressuring Dubai, which is the benchmark crude market in the region, analysts from the US JP Morgan bank believe.

"Media reports point to progress in Iran and P5+1 negotiations in Geneva in recent weeks. There now appears a higher probability of an agreement between the two parties," analysts said in a report obtained by Trend.

An Iranian nuclear deal would allow for a removal of restrictions on exports, analysts said. However, they believe, continued access to oil markets will likely remain tied to the adherence with the terms agreed.

Analysts expect that Iran can add between 300,000-to-500,000 barrels per day (bpd) of crude exports to the market if sanctions are lifted, but most likely not before 4Q2015.

Furthermore, the speed at which refiners start to pick-up Iranian crude will remain critical, analysts believe.

JP Morgan's analysts estimate Iranian crude oil production currently near 2.8 million bpd, similar to its 2014 level.

"Following the sanctions imposed in 2012, European imports of Iranian crude fell from 780,000 bpd and are now close to 110,000 bpd, largely to Turkey, according to the report. Asian refiners remain big buyers of Iranian crude, with China being the largest importer at 553,000 bpd in 2014".

Iran and the P5+1 group (the US, UK, France, Russia, China, and Germany) are negotiating to reach a deal on Tehran's disputed nuclear program. The sides have planned to reach a political understanding by the end of March, and a comprehensive deal by July 1.

The Islamic Republic's average crude oil exports have fallen to 1.9 million barrels per day in fiscal year of 1391 (March 2012-March 2013) from 2.107 million barrels per day in preceding year or a decline by 10 percent, as a result of international sanctions, according to the latest report of the Central Bank of Iran released on Jan. 17.

A series of international sanctions targeting Iran's oil sector have led foreign companies to cancel a number of new projects and upgrades of existing projects.

Aygun Badalova is Trend Agency's staff journalist, follow her on Twitter:@AygunBadalova