Iran Faces Slow Road Back to Oil Market Even With Nuclear Deal

(Bloomberg) -- As Iran nears a deal to ease oil sanctions after almost two years of talks, selling more crude remains a long way off.

The nation’s goal of increasing exports 50 percent as soon as restrictions are lifted won’t be fulfilled, say Goldman Sachs Group Inc., Bank of America Corp. and Societe Generale SA. That would require an extra 500,000 barrels of daily output, which the banks say will take six to 12 months as OPEC’s fourth-biggest producer complies with terms of a deal and revives aging wells. The impact on prices will be limited, the banks predict.

“They’ve got to meet the requirements of any agreement, and that’s going to take time,” Jeff Currie, head of commodities research at Goldman Sachs, said by e-mail from New York on Monday. “When you shut these fields in to that significant of a degree, your ability to bring back production to previous levels will be limited because you’ve done damage to the fields that will require significant investment.”

The U.S. and five other global powers seek an agreement with the Persian Gulf nation to curtail its nuclear program in exchange for removing sanctions that have squeezed its oil trade and economy. Iranian oil exports have plunged 46 percent since 2011 as a result of the restrictions, according to the U.S. Energy Information Administration.

Deal Approaches

Diplomats in Vienna are close to clinching the historic agreement, with both sides having shown the “political will” to finish drafting a long-term accord, European Union foreign policy chief, Federica Mogherini, said June 28. Iranian Foreign Minister Mohammad Javad Zarif rejoined the talks Tuesday, saying he was there “to get a final deal.” The negotiations, now in their 21st month, have been extended to July 7 from June 30.

Oil prices have lost about 45 percent in the past year as Saudi Arabia, Iran’s rival for political sway in the Persian Gulf, leads the Organization of Petroleum Exporting Countries in an effort to defend market share by pumping more oil. While the announcement of a deal would trigger a “knee-jerk” price drop, the slow pace of restoring exports would damp the impact, Societe Generale predicts.

Brent oil, the global benchmark, slid 1.5 percent to $62.64 a barrel on the ICE Futures Europe exchange at 8:54 a.m. in London on Wednesday.


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