17 Jan 2016

Dismantling of Tehran’s nuclear program and lifting of sanctions can have huge impacts on oil production and prices.

Sunday is officially known as “implementation day” when Iran can begin to receive relief from debilitating economic sanctions.
To get here, Iran had to ensure it dismantled about two-thirds of its nuclear centrifuges and export or destroy a large portion of its enriched uranium.  
Under the agreement , non-US countries will now be able to purchase unlimited amounts of crude oil and gas. Iran will also regain access to the international financial system and currency markets.

Suffering economy

The sanctions relief comes at an important time for Iran. The International Monetary Fund (IMF) recently predicted Iran’s economy would continue to suffer until international sanctions were lifted. That means economic growth in the country is predicted at near zero for the year 2015-16 and inflation is expected to remain high at about 14 percent.
“Prospects for 2016/17 are brighter owing to the prospective lifting of economic sanctions,” said the IMF. “Higher oil production, lower costs for trade and financial transactions, and restored access to foreign assets, are expected to lift real GDP to about 4 to 5.5 percent next year.” 

Oil exports

International sanctions on Iran’s oil industry were tightened in 2012 over its nuclear program.
Last month, Iran said it aims to export an additional 500,000 barrels of oil a day once sanctions are lifted in an effort to reclaim its 2012 share of the oil market.
Iran, which has the world’s fourth-largest oil reserves, currently exports 1.1 million barrels of crude oil per day and hopes to get back to its pre-sanctions level of 2.2 million barrels a day. The country’s total production currently stands at 3.1 million barrels per day.
Global oil prices have plunged by more than half over the last year to about $30 a barrel in recent weeks.
In the wake of falling prices, OPEC – led by Iraq and Saudi Arabia – has increased oil production and Russia’s output has also reached a post-Soviet era peak. As a consequence, global stockpiles have reached a record high.
The IMF said a resurgence in Iranian oil exports in 2016 could push crude prices down by $5-$15 per barrel.

Source: Al Jazeera