Return of Iranian oil expected to have ‘significant impact’ on Opec+ policy

There could be serious negotiation within the producers' alliance on continuing the current production curbs, an expert says

FILE PHOTO: The sun is seen behind a crude oil pump jack in the Permian Basin in Loving County, Texas, U.S., November 22, 2019. REUTERS/Angus Mordant/File Photo

The possible return of Iranian oil to the market during Joe Biden’s administration “will have a significant impact” on Opec+ policy, according to an energy expert.

Mr Biden is expected to back the easing of sanctions against Iran, reversing four years of the Trump administration's “maximum pressure” policy that reduced Tehran’s oil exports to zero.

“A change like this (return of Iranian oil) is going to have a very significant impact internally within Opec,” Carlos Pascual, senior vice president for global energy at IHS Markit told the Atlantic Council Global Energy Forum on Wednesday.

“What are going to be the limits that are allowed for each individual countries will have very direct implications ... and we may see within Opec a very serious negotiation on whether they can continue with the Opec+ arrangement."

He added that such a move could have "implications" for crude prices, too.

Opec+, the international coalition of producers led by Saudi Arabia and Russia, has been undertaking market corrections since 2016.

Last year, the group agreed to cut back an historic 9.7 million barrels per day to counter a pandemic-induced demand decline. This year, it has tapered the cuts to 7.2 million bpd, with Saudi Arabia cutting back one million bpd of production to give fellow producers Russia and Kazakhstan leeway to ease their production curbs in order to meet winter demand.

Mr Pascual said the kingdom's decision to cut one million barrels of oil per day earlier this month "is a major step towards Saudi Arabia’s goal of increasing the long term price of oil".

The incoming Biden administration is expected to favour a return of the US to the Joint Comprehensive Plan of Action, which previously allowed Iran financial relief in return for nuclear commitments. The US's rejoining of the nuclear deal will depend on Tehran's return to full compliance with the stipulations of the agreement, which it reneged on following the withdrawal of the Trump administration from the accord in 2018.

Opec secretary general Mohammed Barkindo earlier this month said the possible return of Iranian oil should not worry energy markets.

The group has "established a record of continuously adapting ... being flexible and addressing issues as they emerge," Mr Barkindo, said.

Any excess supply from Iran has also failed to dampen the rally in oil prices. Brent, the international benchmark, is trading above $56 per barrel and the US crude marker West Texas intermediate at about $54 per barrel at 6.26pm UAE time on Wednesday.

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