After nearly two years of negotiations, the P5 +1 (China, France, Germany, Russia, the United Kingdom and the United States) and Iran have reached a nuclear deal. The key points to the agreement have been ironed out and the official signing will occur in the coming days.
The agreement must still be reviewed by Congress, with President Obama vetoing any congressional actions that could potentially block the deal. The International Atomic Energy Association (IAEA) will then begin reviewing and verifying their long list of issues associated with Iran’s nuclear program. It’s not clear how long the IAEA has to inspect, but they will release a final assessment on December 15, 2015.
The two years of negotiations have been concluded with a hefty 159-page document. A couple notable points:
Prior to the sanctions going into effect, Iran was the second largest oil producer in OPEC. Their production has dropped by nearly 1 million barrels (bbls) per day since sanctions have gone into effect. The lifting of these sanctions agreement won’t mean production levels will increase anytime soon, due to the lack of investments and neglect of their oilfields.
The quickest path to reestablishing all of Iran’s oilfields would be to bring in western oil and gas companies to make significant investments and implement modern technology. The scaling process of sanctions being lifted along with the “snap back” provision likely means western companies won’t be overly active in Iran for a year or more.
Iran has an estimated 40 million bbls of oil in storage that could come to the market fairly quickly, but the sanctions will likely keep that tempered a bit. The key takeaway is that more oil is coming to the market from Iran; however, fears of the Iranians flooding the market once the deal concludes is not likely to happen.
Tim Beranek - Principal and Energy Analyst
Certain information provided herein is based on third-party sources, which information, although believed to be accurate, has not been independently verified.