Iranian Nuke Deal
Posted: Tue Jul 14, 2015 8:30 am
Comments below from John White at Roth Capital.
Takeaway: Significant increased crude oil production and exports from Iran are not likely until 2Q-3Q 2016, in our opinion. A return to pre-sanction production levels would mean a significant increase of approximately 0.7 to 0.75 million b/d. This is a considerable amount, equating to about 0.7%-0.8% of consensus 2015 global supply forecasts. Furthermore, production increases likely occur in stages and not all at one point in time. Finally, as any oil and gas producer knows, once a well is shut in, resuming production is not quite like “just turn the faucet back on”. In our experience, it is almost always the case that the subsequent rates of production after well(s) have been shut in for a relatively long amount of time ends up being below what the well(s) were producing before being shut in. Thus, returning to full pre-sanction production levels is not likely, in our view. The agreement does further reinforce the recent negative sentiment in the crude oil market.
Overview of Iranian Production History
Iran and six major world powers reached a nuclear deal on Tuesday, supposedly capping negotiations with an agreement that has major ramifications for the crude oil markets and the Middle East region. Under the deal, sanctions imposed by the United States, European Union and United Nations will be lifted in return for Iran agreeing to long-term curbs on its nuclear program.
Alongside the deal, the United Nations nuclear watchdog, the International Atomic Energy Agency (IAEA), announced an agreement with Iran on a road map to resolve its own outstanding issues with Tehran by the end of this year. The main deal with the world powers depends on the IAEA being able to inspect Iranian nuclear sites and on Iran answering the watchdog's questions about the possible military aims of previous research. The IAEA certification process could add an additional 6-12 months to the sanctions removal time line, according to diplomats closely watching the process.
Takeaway: Significant increased crude oil production and exports from Iran are not likely until 2Q-3Q 2016, in our opinion. A return to pre-sanction production levels would mean a significant increase of approximately 0.7 to 0.75 million b/d. This is a considerable amount, equating to about 0.7%-0.8% of consensus 2015 global supply forecasts. Furthermore, production increases likely occur in stages and not all at one point in time. Finally, as any oil and gas producer knows, once a well is shut in, resuming production is not quite like “just turn the faucet back on”. In our experience, it is almost always the case that the subsequent rates of production after well(s) have been shut in for a relatively long amount of time ends up being below what the well(s) were producing before being shut in. Thus, returning to full pre-sanction production levels is not likely, in our view. The agreement does further reinforce the recent negative sentiment in the crude oil market.
Overview of Iranian Production History
Iran and six major world powers reached a nuclear deal on Tuesday, supposedly capping negotiations with an agreement that has major ramifications for the crude oil markets and the Middle East region. Under the deal, sanctions imposed by the United States, European Union and United Nations will be lifted in return for Iran agreeing to long-term curbs on its nuclear program.
Alongside the deal, the United Nations nuclear watchdog, the International Atomic Energy Agency (IAEA), announced an agreement with Iran on a road map to resolve its own outstanding issues with Tehran by the end of this year. The main deal with the world powers depends on the IAEA being able to inspect Iranian nuclear sites and on Iran answering the watchdog's questions about the possible military aims of previous research. The IAEA certification process could add an additional 6-12 months to the sanctions removal time line, according to diplomats closely watching the process.