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Post: Commodities Corner: Iran nuclear deal: What’s at stake for oil prices as Tehran prepares response to EU proposal

Iran is expected to soon decide on whether to accept the European Union’s proposal to restore the 2015 Joint Comprehensive Plan of Action — a move which could eventually lift sanctions on Tehran and add more than a million barrels per day of oil to the global market.

The U.S. had withdrawn from the deal, also known as the Iran nuclear agreement between Iran and a group of world powers in May 2018, under then-U.S. President Donald Trump. The deal was aimed at curbing Iran’s nuclear capabilities.

Russian Ambassador Mikhail Ulyanov tweeted Monday, citing Iranian sources, that Tehran’s decision on the EU draft agreement on restoration of the JCPOA will be announced before midnight.

“If the U.S. shows a realistic approach and flexibility we can reach the point of an agreement in the next few days,” Iranian Foreign Minister Hossein Amirabdollahian told reporters at a briefing in Tehran, according to Bloomberg. “We’ve clearly told the U.S. we’re ready to enter the phase of announcing the deal, and have a meeting of foreign ministers in Vienna on final conclusions, if our latest points are met.”

Against that backdrop, analysts at Height Securities raised the probability of an Iran nuclear deal revival to 50% from 40%, but also said that Amirabdollahian’s comments “suggest that rather [than] replying to the ‘final text’ with a simple ‘yes’ or ‘no’, Iran will seek additional concessions, exacerbating the risk that talks once again sputter or even collapse.”

Oil futures fell Monday, with weakness attributed in part to prospects for a revived Iran deal. West Texas Intermediate crude for September delivery



fell 3.3% to trade near $89 a barrel on the New York Mercantile Exchange, while October Brent crude

the global benchmark, lost 3.4% to trade near $94.80 a barrel on ICE Futures Europe.

If the U.S. response is to “repeat their domestic miseries and try to gain concessions, we’ll have to talk and negotiate more,” said Amirabdollahian, according to Bloomberg.

Given that, the Height analysts wrote in Monday note that they don’t regard the Aug. 15 deadline for the “take-it-or-leave-it” decision as firm — “if Iran returns with a revision that seems workable.” Still, the “utility of a revived deal diminishes with every day that passes,” they said.

A revival of the JCPOA could lead to the removal of U.S. sanctions on Iran’s oil sector which, in turn, could add 1.3 million barrels to 1.4 million barrels a day of oil to the global market within six to nine months, Height analysts said, citing estimates from Argus.

The Organization of the Petroleum Exporting Countries estimates that Iran, which is a member of the group, produced 2.4 million barrels of oil a day in 2021.

“Sanctions on Russian petroleum have increased the attractiveness of a deal for Europe, which faces fuel inflation, and Iran, which is increasingly competing” with discounted Russian barrels in Asia, analysts at Height said.

In a tweet Monday, Russia’s Ulyanov said Russia “never was and will not be an obstacle on the way toward restoration of the #JCPOA.”

However, Phil Flynn, senior market analyst at The Price Futures Group, points out that it’s “not a done deal yet.”

A JCPOA deal ‘may seem bearish at first” but, ultimately, “won’t make a big difference.’

— Phil Flynn, The Price Futures Group

Iran is “playing the JCPOA for what they can get,” and it may not be serious in wanting a deal, he told MarketWatch. “I expect that they will try to kick the can down the road.”

“Even if we get a deal, I doubt we see that much more oil,” said Flynn, noting that most people think that Iran could add around one million barrels a day in a couple of months if sanctions are lifted, with some estimates closer to 800,000 barrels a day.

“Iran has successfully evaded sanctions,” he said. A JCPOA deal “may seem bearish at first” but, ultimately, “won’t make a big difference.” 

Hear from top Wall Street energy analysts at the Best New Ideas in Money Festival on Sept. 21 and Sept. 22 in New York. RBC’s Helima Croft will be there.

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