The arrival of Iranian crude oil, in ever increasing
volumes, made a significant contribution to the rise in output by the OPEC+ in
April, according to the sources in the Middle East.
In fact, it was so significant that the involuntary
cuts and agreed production cuts made by the member of the block were completely
countered by the amount of Iranian oil that got into the markets.
The analysts, however, do not believe it affected
the dip in price this week, having risen for 6 successive weeks.
On the contrary, it is seen as a positive factor by
the investors: it’s an indication that Iran may come out of its closet, giving
the region much-needed political stability, earlier than they thought; Iranian
media, meanwhile, is optimistic about the prospect of some sanctions being
lifted as the talks on the JCPOA, known as 2015 Iranian nuclear deal, continue
in Vienna, Austria.
Although the other signatories to the deal show
cautious optimism, the desire from both sides to make it work could eclipse the
negativity surrounding the current talks. Who would have thought that the
Iranians and the people involved in the deal coming to talks, a year ago?
Iran has moved away from the rigid position it held
a few months ago on the 2015 nuclear deal and the US, meanwhile, shows some
flexibility about easing sanctions on Iranian banking sector and of course,
Iran’s inability to sell oil.
Both sides know very well that the stakes cannot be
higher unless they strike a deal during the current talks. In this context, the
talks will continue for some time on give-and-take basis, giving the crude oil
markets a sense of stability in the volatile region of the Middle East.
Since the forecasts of growth in demand are pretty
reliable, based on encouraging economic data from the US, China, Europe and
even Japan, the arrival of Iranian oil is not going to cause a supply glut that
some investors fear.
In this context, the fall in oil price this week is
more to do with the situation in India – and to some extent, in Japan – than the
fears of over-supply.
