Any nuclear deal between Iran and six world powers loosening
sanctions against Tehran could flood an oversupplied oil market with more fuel,
yet sectors like cement and steel would see a rise in demand as the country
works to revitalise its economy.
Officials
involved in ongoing negotiations said on Sunday they were close to a deal that
would bring sanctions relief in exchange for curbs to Tehran’s atomic
programme, although no agreement was expected before Monday.
Analysts have
focused largely on oil in determining the impact on international commodities
markets if sanctions are lifted. The timing of any lifting of the measures that
have cut Iran’s crude exports as well as a United Nations Security Council arms
embargo and ban on its ballistic missile programme have been among the major
sticking points on reaching a deal.
But even with a
diplomatic agreement this week it would take time for Iran to start exporting
large amounts of crude again as the sanctions on exports would first need to be
formally lifted and Iran’s crumbling oil infrastructure modernised.
“They can
add about 200,000 bpd, which is not a significant volume,” said Nick
Sharma, managing director at research & consulting firm IHS, estimating
that it would take at least 18 months for Iran to add another million bpd to
exports.
Japan’s government-affiliated
Institute of Energy Economics said that if there was a deal Iran’s oil output
might rise by 700,000-800,000 barrels bpd by the second half of 2016.
Iran, a member
of the Organization of the Petroleum Exporting Countries (OPEC) has some of the
world’s biggest oil reserves. It exported almost 3 million barrels per day
(bpd) of crude at its peak, before Western sanctions over its alleged ambitions
to build a nuclear bomb saw shipments collapse to about a million bpd over the
last 2-1/2 years.
A modest
increase in available supplies would still add to an estimated 2.6 million
barrels of crude being produced each day in excess of daily global demand,
threatening to overwhelm on and off-shore storage capacities.
Analysts say a
further swell in spot supplies will drag prices back to or below levels seen
during the peak of the global financial crisis of 2008/2009.
While Iran’s
oil potential is already largely priced into the market, analysts say other
sectors such as cement, steel and agriculture commodities would also be
affected.
“After
years of neglect, should sanctions fall away, then their oil exports will be able
to fund an infrastructure development plan that will need steel, power and
cement,” said Ian Claxton, managing director of Thai ship owner Thoresen
Shipping.
“They
currently don’t have cement manufacturing capabilities so … bagged or bulk
cement combined with increased steel for construction could well be the
commodities most affected for bulk shipments with India, Middle East and China
as origins,” he added.
Claxton said
that Iran would also need to import more agricultural products like rice, wheat,
corn and soy meal.
“The need
for bulk wheat, corn and rice will increase as local GDP and disposable income
increases, again from Thailand, India, the USA. – if all is forgiven – and
South America plus the Black Sea,” he said.
Iran also used
to be a significant supplier of iron ore to China, although analysts say that
due to global oversupply and record low prices that Iran ISIL unlikely to pursue
a large-scale resumption in this sector.
Western powers
have long suspected Iran of aiming to build nuclear weapons and using its
civilian atomic energy programme to cloak its intention – an accusation Iran
strongly denies.
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