This flyer image from the IIPA (Iran International Photo Agency) shows a view of the reactor building of the Bushehr nuclear power plant built in Russia when the first fuel was loaded on August 21, 2010 in Bushehr in southern Iran.
The US and Iran are stepping up efforts to resolve a nuclear stalemate where global oil markets are on the sidelines and experts are skeptical of success.
“It is time for these negotiations,” Helima Croft, global head of commodities strategy at RBC Capital Markets, told CNBC’s Hadley Gamble on Tuesday as representatives gathered in Vienna, Austria for “indirect talks” to bring both countries back in Bringing in line with the EU nuclear agreement 2015.
“We are entering the election season in Iran in a couple of weeks and if we do not get a significant breakthrough in these negotiations everything will likely freeze,” she said.
While the talks are the most significant step so far towards reviving the deal, neither side is expecting a major breakthrough. Iranian officials want the US to end Trump-era economic sanctions before returning to compliance – a concession Washington appears to be unwilling to accept.
“I don’t think we can expect very much,” Albert Wolf, associate fellow at the Johns Hopkins School of Advanced International Studies, told CNBC on Tuesday.
Skepticism about the talks was heightened by reports that European officials were acting as mediators between the US and Iran rather than the two sides meeting face-to-face to discuss the issues.
“There haven’t even been any formal or informal talks between the US and Iranian sides. So it looks like these talks are going to go bankrupt at the moment,” said Wolf.
Others, including former US Secretary of Energy, Ernest Moniz, I said that the US is running out of time to engage in meaningful diplomacy. Iran’s June election is widely expected to lead to tougher political leadership after years of economic suffering caused by the Trump administration’s sanctions following Washington’s withdrawal from the deal in May 2018.
Iranian Foreign Ministry spokesman Saied Khatibzadeh gesticulates during a press conference in Tehran on February 22, 2021. Iran hailed as a “significant achievement” a temporary agreement that Tehran had made with the head of the UN nuclear watchdog during on-site inspections.
Photo by ATTA KENARE | AFP via Getty Images
US officials themselves seem just as sober about the talks.
“We do not underestimate the extent of the challenges ahead. These are early days,” State Department spokesman Ned Price said during a press conference on Monday.
“We do not expect an early or immediate breakthrough as these discussions, which we fully expect will be difficult. However, we believe that these discussions with our partners, and in turn with our partners with Iran, are a healthy step forward. “
Price added: “We don’t currently anticipate there will be any direct talks with Iran, but of course we remain open to them. So we have to see how things begin earlier this week.”
Barrels are coming back
As one of OPEC’s largest oil producers, Iranian exports were cut in the years after the US withdrew from the joint comprehensive plan of action. A return to the deal and the lifting of US sanctions on Iranian crude could have a significant impact on oil market dynamics.
Croft said “significant movement” in the talks would increase the prospect of large quantities of Iranian oil returning to world markets.
“If they break through in the next few weeks, we could get significant volumes to market in the second half of the year,” she said.
However, she added that if Washington or Tehran intervenes and there is no breakthrough, the chances of reviving the deal and fully restoring Iranian exports this year will be greatly reduced.
However, not all market observers will soon see the Iran talks as a consequence for the price of crude oil. Goldman Sachs analysts, led by Damien Courvalin, see no full recovery in Iranian oil exports this year.
“After a surge in Iranian exports this year, our base case remains that a full recovery will not occur until the summer of 2022, which will likely imply an agreement in early 2022,” Goldman analysts wrote in a note on Tuesday.
“Even if an agreement is reached earlier, we believe it would not detract from our constructive view of oil relative to market moves through 2022, as OPEC is likely to offset the response and consensus expectation for Iran to return by next year becomes.”
Iranian crude oil exports to China
According to S&P Global Platts, Iranian crude oil production has increased significantly in recent months, reaching 2.14 million barrels per day in February – “an increase of 190,000 b / d from a 33-year low of 1.95 million b / d in August”. the company reported.
The boost comes when Tehran increases its oil deliveries to China despite Washington, an endeavor made possible with the help of anti-detection methods such as switching off the transponders of its ships or the AIS – Automatic Identification System – a technology that prompted their ships to do so referred to as “ghost ships”.
While US officials have condemned the practice, Croft warned that Washington’s economic leverage may have waned thanks to more robust oil prices and rising Iranian exports to China.
“It doesn’t look like Iran is very afraid of being stopped by the US government,” said Croft.
– CNBC’s Amanda Macias contributed to this report.