Crude oil markets are quiet as the Iran/West talks continue with both side trying to hammer out a framework deal one day after the end of March deadline. Russian Foreign Monster Lavrov continues say that a deal is at hand. Iran’s senior negotiator Araqchi says he hopes to wrap up nuclear talks with the major powers on Wednesday although some gaps remain. The French Foreign Minister said things have progressed but not enough for an immediate deal. These are some of quotes circulating in the media airwaves and published by both Reuters and Bloomberg.
The comments today are a bit more optimistic than those from yesterday and suggest that a deal is inching closer. I remain of the view that some sort of a framework deal will get done…probably this week. Whether or not it will turn out to be a good deal for the West or a better deal for Iran will be hotly contested and debated over the coming months. What it will mean is a path to the releasing of sanctions.
It is not clear as to when and how the sanctions will be released but as they are relaxed Iran will slowly have a renewed ability to sell its oil at will. The most immediate sale of oil will likely come from about 30 million barrels of stored oil in floating storage which will be sellable quickly. Unlike oil in the ground which may take more time for Iran to ramp up production that has been shut in for an extended period of time.
Overall a deal is bearish for oil prices as it simply means more oil will be flowing into a market that is already awash in oil. It also raises the question as to what if anything other OPEC members will do to make room for additional Iranian oil. I suspect the Saudi contingency will object strongly to lowering their production to accommodate Iran especially since they are in the midst of a proxy war with Iran in Yemen. A deal will make what is setting up to be an interesting OPEC meeting in June into an extremely interesting meet.