The recently signed Geneva deal stipulates that the US and its western allies will not impose any new nuclear-related sanctions on Iran's petrochemical exports for a period of six months provided that Iran takes steps to curb its nuclear program.
As per the deal, Iran is required to stop enriching uranium beyond 5%, give greater access to inspectors to its nuclear sites and stop development at the Arak plant, suspected to be having a plutonium-producing reactor. In exchange, the P5+1 (United States, Russia, China, United Kingdom, and France, plus Germany) have decided to ease Iran's access to about USD 4.2 billion in foreign currency reserves. Moreover, Iran will receive sanctions relief worth approximately USD 7 billion on sectors including precious metals and petrochemicals.
Following the Geneva accord, the US State Department has yet again granted six-month Iran sanction waivers to China, India, the Republic of Korea, Turkey, and Taiwan on the basis of additional significant reductions in the volume of their purchases of Iranian crude oil, implying that banks in these countries will not be cut off from the U.S. financial system for the next six months.
The landmark deal reached at Geneva has given rise to market speculation that prices of crude oil will fall if talks between Iran and the US improve in the coming months. Although Iran is not a major player if the quantity of crude oil produced in the country is considered, this landmark deal, which has the backing of Iran's supreme leader Ayatollah Khamenei, is expected to have a sentimental impact on crude oil prices. Iran reaching out to Saudi Arabia inspiring a possible de-escalation of tensions between the two nations has been another positive recent development hinting towards a fall in crude oil prices.
But then, there are other factors that do not seem to be too promising for Iran. These include its inability to increase its refinery capacity owing to which so it was forced to start closing down some of its oil wells and store crude oil in tankers. Considering that Iran holds 25 to 30 million barrels of unsold crude oil in tankers and the country's current output level, it appears that Iran will be able to reopen its closed oil wells not before the third quarter of 2014. The US shale gas boom and its technological advances in the domain of shale gas drilling is unlikely to have much effect on Iranian crude as there are plenty of refineries in the US that use the heavy and mostly medium crude produced by Iran. However, the crude oil produced by Iraq and Russia are similar to that of Iran and have already almost replaced Iranian crude in European refineries.
Thus, with the Organization of Petroleum Exporting Countries (OPEC) maintaining the 30 million bpd ceiling till June 2014 in its meeting held in Vienna, and with other OPEC member countries like Iraq looking to boost their crude oil production, Iran's goal to start producing 4 million bpd of crude oil by mid-2014 seems ambitious at this point of time.
As per the deal, Iran is required to stop enriching uranium beyond 5%, give greater access to inspectors to its nuclear sites and stop development at the Arak plant, suspected to be having a plutonium-producing reactor. In exchange, the P5+1 (United States, Russia, China, United Kingdom, and France, plus Germany) have decided to ease Iran's access to about USD 4.2 billion in foreign currency reserves. Moreover, Iran will receive sanctions relief worth approximately USD 7 billion on sectors including precious metals and petrochemicals.
Following the Geneva accord, the US State Department has yet again granted six-month Iran sanction waivers to China, India, the Republic of Korea, Turkey, and Taiwan on the basis of additional significant reductions in the volume of their purchases of Iranian crude oil, implying that banks in these countries will not be cut off from the U.S. financial system for the next six months.
The landmark deal reached at Geneva has given rise to market speculation that prices of crude oil will fall if talks between Iran and the US improve in the coming months. Although Iran is not a major player if the quantity of crude oil produced in the country is considered, this landmark deal, which has the backing of Iran's supreme leader Ayatollah Khamenei, is expected to have a sentimental impact on crude oil prices. Iran reaching out to Saudi Arabia inspiring a possible de-escalation of tensions between the two nations has been another positive recent development hinting towards a fall in crude oil prices.
But then, there are other factors that do not seem to be too promising for Iran. These include its inability to increase its refinery capacity owing to which so it was forced to start closing down some of its oil wells and store crude oil in tankers. Considering that Iran holds 25 to 30 million barrels of unsold crude oil in tankers and the country's current output level, it appears that Iran will be able to reopen its closed oil wells not before the third quarter of 2014. The US shale gas boom and its technological advances in the domain of shale gas drilling is unlikely to have much effect on Iranian crude as there are plenty of refineries in the US that use the heavy and mostly medium crude produced by Iran. However, the crude oil produced by Iraq and Russia are similar to that of Iran and have already almost replaced Iranian crude in European refineries.
Thus, with the Organization of Petroleum Exporting Countries (OPEC) maintaining the 30 million bpd ceiling till June 2014 in its meeting held in Vienna, and with other OPEC member countries like Iraq looking to boost their crude oil production, Iran's goal to start producing 4 million bpd of crude oil by mid-2014 seems ambitious at this point of time.
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