Iran, the White House, and the Oil Market

Iran, the White House, and the Oil Market

The News:

MEE:  Iran and US near interim deal on nuclear enrichment and oil exports

REUTERS: US denies report of nearing interim nuclear deal with Iran

Summary:

The White House today denied a report published earlier by MEE that Iran and the US were close to an interim deal. Washington called the report “false and misleading.”

Space Recording

Here is the recording for the Twitter Space that we held earlier today regarding the news about an agreement between Iran and the US and its impact on the oil market:

https://twitter.com/anasalhajji/status/1666882924069650439?s=20

EOA’s Main Takeaway:

• “We believe the deal when we see it”. That is what we wrote immediately after the news was out. Then the White House confirmed our view and denied the MEE news.

• We have been there before.  Iran is producing and exporting at maximum.  Within the past 12 months, Iran’s floating storage declined by more than 50% as indicated in Figure (1) below. Any deal that will end sanctions will not affect the fundamentals of the oil market.

• It will take time to increase production again. Hence, there is no justification for the decrease in oil prices today by 4.5% due to the news about an Iran-US interim deal. Prices recovered later when the White House denied the news (see price chart below).

        Source: Bloomberg, 2023

• Iran’s frozen funds, which could be released, once and if, a deal is reached, are NOT in the US but in other countries, including South Korea and Iraq, due to US sanctions.  

• Certain powerful factions within the regime make massive amounts of money from the sanctions imposed on Iran and the black market. They will do their best to derail any agreement that will end or reduce the size of the black market, not only in oil but for many consumer goods too.