Iran oil exports limited to 1 million barrels a day under nuclear accord

Iran's crude oil sales will still be limited to about 1 million barrels a day under international sanctions that remain in force as part of the nuclear accord reached in Geneva today, according to the White House.

Iran’s crude exports have fallen 60 per cent since the beginning of 2012, depriving the country of more than US$80 billion in revenue, the Obama administration said in a statement after the deal was announced. The agreement means buyers that have significantly reduced purchases won’t be required to make further cuts and includes the removal of a European Union ban on insuring tankers transporting Iranian oil. An EU embargo on crude imports from the country remains in place.

The six-month accord, which offers about $7bn in relief from sanctions in return for curbs on Iran’s nuclear programme, leaves in place banking and financial measures that have constrained crude exports. Restrictions on sales of refined products will remain in effect, the White House said.

“It’s a step, but it’s not like the end of a sanctions regime, not like it’s going to have a significant impact on the real balances of supply and demand for oil,” Ed Morse, the New York-based head of commodities research at Citigroup, said in a phone interview. “On the other hand, it should take off whatever risk there might be in the market for the moment in terms of additional sanctions.”

Under the agreement, Iran will be allowed limited petrochemical exports, and some curbs on gold trading will be removed. Those measures, together with an easing of sanctions on the automotive industry, will potentially provide Iran with $1.5bn in revenue, the White House said. The accord also eases constraints on safety-related repairs for some Iranian airlines.

The initial deal is intended as a first step toward a comprehensive accord that Iran and world powers are seeking in six months to ensure the nuclear programme is for peaceful purposes. In exchange, the nation would expect a lifting of all sanctions related to its nuclear work.

In June 2012, there were 23 importers of Iranian crude; today, only six remain - China, India, South Korea, Japan, Turkey and Taiwan, according to US officials. Since July 2012, the EU has also banned oil imports, and until today’s deal had restricted insurance for ships carrying crude from the country.

“In the next six months, Iran’s crude oil sales cannot increase,” the Obama administration said in the statement. “Under this first step, the European Union crude oil ban will remain in effect and Iran will be held to approximately 1 million barrels per day in sales.”

Iran is the sixth-biggest producer in the Opec, down from the second-place rank it held until last year.

Crude exports fell to a 21-month low of 715,000 barrels a day in October, compared with an average 1.1 million for the first nine months of the year, according to the International Energy Agency. The volume of Iran’s unsold oil being stored on tankers rose to about 37 million barrels in October, the IEA estimated.