US cancelled ban on Iranian oil purchase

US President Barack Obama has signed the memorandum lifting the ban on purchase of oil from Iran, press house of the White House reported on November 18 evening. Obama administration reported that the his administration will no longer ban purchase of Iranian oil in line with the agreement on the Iranian nuclear program adopted in Vienna earlier. 

The agreement was reached on July 14, 2015. Iran has promised the UN Security Council to refuse of any attempts to get nuclear weapons in exchange lifting of the Western sanctions (first of all applied to limitations on Iranian oil purchase). If the agreement is violated, the sanctions must be resumed within 65 days. However, the information that Iran has started honoring the agreement was released only early November in the special report.

The oil sanctions against Iran were introduced in 2012 when Iran stopped selling oil to the US and UK. Since 2013 Iranian oil is not exported to the remaining European Union member-states.

The political decisions could have serious economic consequences for the entire world. Iran has been warning as soon as the sanctions are lifted, it will increase oil production and export, despite excess of oil at the world market (about 1 million barrels a day).

Before the sanctions Iran extracted about 4.2 million barrels of oil a day and exported 2.5 million barrels. As soon as the sanctions were introduced, oil export dropped down to 1.1 million barrels a day and oil was exported mainly to the Pacific and Asian region. Now oil extraction in Iran is slightly over 3 million barrels a day. In the past time export has slightly increased. According to the estimates of the leading expert of the Russian Union of Oil and Gas Manufacturers Rustam Tankayev, at present Iran exports about 1.5 million barrels of oil a day.

Everything will depend on the pace of growth of oil extraction and economy of Iran. Tankayev mentioned that right now Iran could increase production at the expense of new fields located closer to the Iraqi border. However, one needs investments for that and with the current oil prices it will be hard to find investments.

Analyst of Raiffeisen bank, Andrei Politshuk, forecasts that if additional volumes of Iranian oil reach the world markets, they will affect the prices, but it will hardly be a strong influence.

One should also bear in mind that Iran (in addition to Iraq and Saudi Arabia) reduces the price with its oil volumes trying to expand its market share. The source from the oil industry told Gazeta.ru that three above-mentioned countries have concluded an agreement to revise the oil price formula.

“No matter how low oil price will get, they will still sell oil at a cheaper price,” the same source told Gazeta.ru. The same source said that November discount of Saudi Arabia was $0.50 per barrel, Iraq - $0.35 and Iran - $0.30.—0—