Oil in Global Economy Series: Will Iran deal impact be limited for oil price?

The question is, whether the U.S. withdrawal from the Iran nuclear agreement would have a major or limited impact on oil prices, and the answer to that is we do not know at this point in time because so many details are missing which are a must to conclude a concrete answer.

• We do not have the details of the sanctions that are going to be imposed on Iran by the United States unilaterally.
• It is not clear whether Iran would be able to bypass the U.S. sanctions with the help of other partners such as the EU, the UK, Russia, and China. It is worth remembering that the U.S. sanctions alone couldn’t bring Tehran to the negotiating table back in 2015, the EU sanctions on ship insurance combined with the U.S. did the trick.
• It is also not clear that whether Saudi Arabia, the arch-rival of Iran would intervene to compensate of the supplies lost to Iran sanctions. It is worth noting that with Saudi Aramco IPO lined up, Saudi Arabia has a vested interest to see the oil price move higher.
• According to latest numbers, Iran exports around 2.5 million barrels per day worth of crude oil to the market. So, while the number is significant, it is not as significant as Saudi Arabia’s or Russia’s.
• It is also worth remembering that if Iran’s missing (due to sanctions) barrels are always positive for the oil market, the price wouldn’t have dropped sharply back in 2014/15.

It is in the nature of the current ultra-fast media to come to conclusion quickly, however, we would like to urge our readers for patience and prudence as we closely monitor the situation.