The return of Iranian crude to global markets following a temporary US sanctions waiver on Iranian oil sales could help offset supply losses elsewhere in the Gulf region and ease pressure on tight global oil markets, says industry experts. The move could bring additional crude supplies to the market at a time when the energy sector is recovering from disruptions caused by the prolonged conflict in West Asia.
Jim Burkhard, Vice President and Head of Research for Oil Markets, Energy and Mobility at S&P Global Commodity Insights, said the key difference is that Iranian oil would likely no longer trade at the steep discounts seen under sanctions. However, he cautioned that the extent of damage to Iran’s production and export infrastructure remains a major uncertainty.
“Without sanctions-related restrictions, sellers would be able to capture higher prices. Iranian exports could partially compensate for lost production elsewhere in the Gulf region. The major uncertainty is the extent of damage to Iranian production and export infrastructure. If facilities can be restored quickly, production could return toward levels of 3–4 million barrels per day over time,” he added.
The development comes as peace talks between Iran and the US continue to make progress. The Office of Foreign Assets Control (OFAC) under the US Department of the Treasury has issued a 60-day general licence authorising the production, delivery and sale of Iranian crude and petroleum products. The waiver remains valid until August 21. Earlier, the US had also temporarily waived sanctions on seaborne Iranian oil sales for 30 days beginning March 20.
Prashant Vashisht, Senior Vice President and Co-Group Head, Corporate Sector Ratings at ICRA Ltd, said the reopening of the Strait of Hormuz and the issuance of the temporary licence are positive developments for the crude oil market, which has remained under supply pressure.
