More Iranian Oil Could Hit The Market Now That Iran Deal Is Assured

U.S. President Barack Obama’s signature foreign policy initiative – the historic nuclear deal with Iran – appears poised to fend off Congressional opposition.

After several Democratic lawmakers in the U.S. Senate came out in support of the Iran deal in recent days, the survival of the accord is all but assured. Democratic Senators Ron Wyden (D-OR) Richard Blumenthal (D-CT), and Gary Peters (D-MI) allannounced their support for the nuclear deal with Iran, bringing the total number of Senators who have backed the deal to 41, enough to withstand attempts by Republicans to derail the agreement.

The deal will give international nuclear weapons inspectors access to Iranian nuclear facilities, and freeze nuclear activities for 10 years. In exchange, Iran will see sanctions relief.

Related: Does Selling Oil From The Strategic Petroleum Reserve Make Sense?

That could lead to the revival of Iran’s oil industry, potentially allowing Iran to ramp up oil production and exports. Estimates vary, but Iranian officials are making ambitious statements about its comeback. Iran’s oil minister Bijan Zanganeh has said that his country will be able to ramp up oil production by 500,000 barrels per day immediately after international sanctions are removed, followed by an additional 500,000 barrels per day not too long after that.

“We should sell our oil whether the price falls or goes to $100 (a barrel). Even though we would like to sell our oil more expensively, the price is determined by the market,” Zanganeh said last month. “After lifting sanctions, Iran will take back the market share of more than 1 million barrels a day that it lost,” he said.

The U.S. Congress has until September 17 to act on the Iran deal, after which they lose the ability to take action. With the White House now in the driver’s seat, the agreement will likely take effect. That means that sanctions could be removed by the end of this year or early 2016.

Related: Midweek Sector Update: Near-Term Forces Could Push Oil Prices Lower

For oil prices, the potential for Iran to bring a flood of crude back online amounts to another blow to the possibility for a strong rebound. U.S. oil production is declining, but not fast enough. Global oil demand is rising, but also not quite enough to soak up excess production. If and when Iran brings more supplies back online, that will push off an oil market adjustment a bit further into the future. Such a scenario has been expected since Iran and global powers reached an agreement at the end of June, but with Democratic support now squarely behind the deal in the U.S. Congress, it is a near certainty.

By Charles Kennedy of

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  • Brockland A.T.

    Sure, like Iran wouldn’t want a good price for its oil. Seems like another Hail Mary pass to try and scuttle the Iran P5+1 deal at the eleventh hour. Iran is so broke, it can’t pump oil at a loss like the Saudis or frackers.

    At this point, from this perspective, the world price of oil is irrelevant entertainment news. It was bust time anyway and lost oilpatch jobs were already long in the cards. Low oil prices aren’t resulting in cheap gas and making it any cheaper to drive, so its obvious this boom and bust was spiked.

    Oil companies obviously aren’t losing money selling gasoline.

  • Rehmat

    Iranian planners are not that stupid to pump more oil than their international quota because that will lower the oil price and Iranian economy will suffer. Furthermore, oil is not the only Iranian commodity to earn foreign exchange. Iran, according to Jewish media, has been exporting its centrifuge and drone technology to Latin American nations.

    As Iran’s Supreme Leader Ayatullah Ali Khamenei said last week that the only reason Iran negotiated with the so-called P5+1 was to get all sanctions against Iran removed. He emphasized that without the removal of all sanctions against Iran – Tehran will never sign the US-Iran agreement.