 But in the long run, that figures to change as the deal may have major
geopolitical ramifications in the Middle East while also placing financial
pressure on U.S. producers.
“There isn’t going to be a surge in Iranian exports, at least not for several
months to come because the detail in the agreement, once you drill down into it,
Iran still has to demonstrate certain behaviors over the next few months,” said
Neil Atkinson, head of analysis at the London-based Lloyd’s List Intelligence,
which monitors worldwide shipping and trade.
According to the details of the agreement, by Oct. 15 Iran must show that it has
met its commitments and inspectors with the International Atomic Energy Agency
hope to issue a final report by Dec. 15.
“It’s almost like getting a certificate of verification from the U.N. in
December,” Atkinson said on CNBC. “At that point, it may well have become
possible for them to export more oil, but I think the more sober analysis we’ve
looked at in recent times suggests that Iran will export more oil, but it’s not
going to be a tidal wave.”
A longtime member of the Organization of Petroleum Exporting Countries, Iran
owns the world’s fourth-highest amount of crude proved oil reserves, but the
regime has been badly hurt by economic sanctions imposed by the United States
and European countries in 2012.
Those sanctions can be lifted in light of Tuesday’s announcement, provided it
adheres to the agreement’s provisions.
Of course, that brings up a sticky question: Will Iran abide by the agreement?
“I don’t have a high degree of trust in the Iranians,” Ted Kassinger, a former
State Department attorney and deputy secretary at the U.S. Department of
Commerce in 2004 and 2005, told Watchdog.org. “But on the other hand, the deal
is somewhat more detailed than I expected.”
Provided it follows the rules, Iran can start putting stockpiles of oil on the
international market. Estimates vary when it comes to guessing how much Iranian
oil is in storage, ranging from 20 million to 40 million barrels.
That’s a lot but the numbers are relative, considering the world consumes about
94 million barrels a day.
Within moments of the deal’s agreement, the oil market got nervous.
The price of Brent crude — the widely-recognized international price — dropped 2
percent.
But analysts said traders realized the market anticipated an agreement would be
reached and Brent bounced back, with futures prices for August rising 66 cents.
Traders in West Texas Intermediate crude — the benchmark for U.S. producers —
shrugged off the news of the deal as the price per barrel went up to almost $53.
Looking long-term, the trade agreement with Iran will increase the amount of oil
sloshing around the globe.
Energy analysts at Platts estimate that within a few months Iran will be able to
put a half-million barrels a day on the market — then add another 500,000
barrels a day after that.
More oil on the market will put downward pressure on prices, which took a dive
after OPEC — and the cartel’s dominant member, Saudi Arabia — decided in
November to resist curtailing production.
North American producers hurting since the OPEC decision may find themselves
under more price pressure when the full effect of the lifted sanctions on Iran
are felt.
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 “Assuming Iran throws another 500,000 to a million barrels on the
market, there’s going to be an offset in terms of declining North
American production,” said Bernard “Bud” Weinstein, associate
director of the Maguire Energy Institute at Southern Methodist
University. “Our shale producers are clearly in a period of
entrenchment and consolidation.”
But at the same time, costs have come down as U.S. producers,
reacting to the OPEC move, have developed more efficient extraction
methods.
“The next couple years it’s going to be pretty problematic, but
once world oil prices recover and get back to the $70-$80 (a barrel)
range, then shale will come back big time,” Weinstein said.
The nuclear agreement’s biggest impact may be geopolitical, leading
to more tension in the Middle East among Persian Gulf countries — in
particular Saudi Arabia, the country that dominates OPEC and has
clashed with Iran for influence in the region.
Iran’s population is primarily Shiite Muslim while Saudi Arabia is
majority Sunni.
Related: Could a nuclear deal with Iran threaten the U.S. oil boom?
The Saudi government didn’t comment on the deal, but a news anchor
on its state-run television network did.
“Iran made chaos in the Arab world and will extend further after the
agreement, and the GCC (Gulf Cooperation Council) countries should
reduce their confidence in America and turn their focus to Russia
and China,” said Mohammed al-Mohya, on Saudi Channel 1, according to
Reuters.
Armed conflict in the region could interrupt oil supplies, which
would lead to price spikes across the world.
“I think the Saudis and others within the Sunni orbit are going to
think very hard about their own nuclear programs,” said Kassinger, a
partner in the international law firm of O’Melveney and Myers. “I
think they’re going to be very concerned about what will happen in
eight to 10 years from now. The Iranians will be teed up to go
forward with their weapons program.”
“OPEC has been pumping full out since last November,” said
Weinstein. “It has not cut back production. If Iran adds another
million barrels a day, will other OPEC members cut back?”
The deal still has to be approved by Congress, which is controlled
by Republicans who have blasted Secretary of State John Kerry and
the Obama administration, accusing them of going easy on the Iranian
government.
Even though Republicans hold majorities in the U.S Senate and House,
putting a stop to the nuclear deal will be hard.
Since the agreement is not a treaty, should both houses of Congress
reject the deal by a simple majority it would go to President Obama,
who has promised a veto.
That means to truly scuttle the deal, opponents will have to get a
veto-proof majority of two-thirds of both chambers. And that means
getting a healthy number of Democrats to vote against a president
from their own party — and that figures to a heavy lift.
A U.S. embargo on imports of Iranian oil remains in place, and U.S.
oil companies that want to make deals in Iran to develop oil there
have to abide by a separate group of sanctions independent of
Tuesday’s nuclear deal.
Foreign oil companies such as BP and Shell have held talks with
Iran’s oil minister to help develop the country’s reserves.
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