The Iran nuclear deal negotiated by the 5 permanent members of the UN Security Council, US, UK, Russia, China, and France plus Germany defuses long standing tension between Iran and the West, potentially changing the political landscape of the Middle East. But what about Iran’s oil and the impact on the economic landscape?

For years Iran’s economy has been crippled by US sanctions, and this includes its oil production. Iran has the 4th largest oil reserves in the world, coming in at an estimated 158 billion barrels, but lack of investment has led to a serious decline in production capacity. In 2008 Iran’s oil fields produced 4 million barrels of oil a day, in 2015 it’s down to 2.8 million barrels. Today its markets have diminished with exports going mostly to China, India, Japan, South Korea, and Turkey.

The question now is how much, if any, will Iran’s resurgence impact oil prices? There are two issues – how much they currently have in storage and what they can ramp up in terms of production. Iran does indeed have oil sitting there – stored mostly in tankers off the coast. However Citigroup’s head of commodities research Edward Morse described the amount of oil in tankers as a bit misleading. “Of that 40 million barrels or so roughly two thirds is either condensate or condensate blended crude oil. The condensate can be exported under the sanctions regime, so the question is why has it not been exported, and the answer is almost certainly that it is so high in sulphur content that no refinery anywhere in the world wants to take it on, except at a very steep discount. So I’d say two thirds of that 40 million barrels is not really overhanging the market, only one third is.”

So we are talking 13 million barrels, which is hardly going to have a dramatic initial impact. It will also be 6 months before sanctions are realistically lifted. Iran will be unlikely to want to unload it all at once and crash prices. It’s possible other countries may also increase their production to hold market share which will lead to the price being driven down.

The International Energy Agency (IEA) estimates that Iran could potentially increase its product to 3.5 million barrels per day “within months of sanctions being lifted.” Others such as Richard Nephew (who served as lead sanctions expert for the US team negotiating with Iran) are less sure. He describes Iran’s oil producing infrastructure as plagued by “fatigued fields and antiquated equipment.” Some estimate the cost of getting Iran’s production back to pre-sanction levels as between $50 billion and $100 billion – which will need to come from foreign investment. This could take years, as high in investors’ minds will be the risk of the nuclear deal falling over and sanctions being reimposed.

Iran wants to recover its position as the number 2 oil producer in the world after Saudi Arabia, and this could conceivably be good too for the West – with oil prices being pushed down, but the bottom line is any dramatic changes are many years, some might argue decades off. In the short term the impact of the nuclear deal is simply this: prices are unlikely to increase. According to Thomas Pugh, commodities economist at consultants Capital Economics, “the return of Iranian oil exports over the next year is one factor likely to keep oil prices low.”

http://investorsking.com/irans-oil-deal-and-the-struggle-ahead/

My sentiments Exactly..

when supplies out grow the demand there is usually a price crash, so truth be told it will definitively affect Nigeria, the earlier we start mega diversification of our revenues the better for us

Inception:
My sentiments Exactly..

Most people thinks Iran will hit the ground running after several years of economic sabotage. The truth is Iran need huge FDI to reinvent itself and catch up with the rest of the world.

The current practice and method in place can not sustain its possible potential because other oil producing countries are already developing a competitive strategy to retain their current market share now that the deal has been announced.

hopeforcharles:
when supplies out grow the demand there is usually a price crash, so truth be told it will definitively affect Nigeria, the earlier we start mega diversification of our revenues the better for us

No doubt diversification is key to sustaining Nigerian economy in the long run but the fact remains that this particular deal have nothing on our situation, with or without this deal Nigeria is Nigeria.

In fact, I am certain that nobody at the realm of power is currently looking into how to contained the possible outcome of the deal if it eventually survived U.S lawmaker's review.

Ishilove and lalasticlala. Front page material.

Truth234:


No doubt diversification is key to sustaining Nigerian economy in the long run but the fact remains that this particular deal have nothing on our situation, with or without this deal Nigeria is Nigeria.

In fact, I am certain that nobody at the realm of power is currently looking into how to contained the possible outcome of the deal if it eventually survived U.S lawmaker's review.

I strongly think they should with immediate alacrity, Oil happens and for now is our main source of income, had it been we have been prepared or have bumpers then we wont be very much disturb, but now that it is obviously threatened, its like equating a man's source of upkeep been threatened and the man is expected to address the issue head on.

hopeforcharles:

I strongly think they should with immediate alacrity, Oil happens and for now is our main source of income, had it been we have been prepared or have bumpers then we wont be very much disturb, but now that it is obviously threatened, its like equating a man's source of upkeep been threatened and the man is expected to address the issue head on.

That is actually what is expected of a well functioning economy, news coming from Saudi is that they are planning to increase their production if Iran deal sealed in order for them to retain their global market share.

So basically the winner will be the best strategist and not the largest oil reserve.

Truth234:


That is actually what is expected of a well functioning economy, news coming from Saudi is that they are planning to increase their production if Iran deal sealed in order for them to retain their global market share.

So basically the winner will be the best strategist and not the largest oil reserve.

Now You are talking. They should do the needful ASAP. Or else PMB will lack enough funds to fulfilling his promises, thereby making him a Liar.

hopeforcharles:

Now You are talking. They should do the needful ASAP. Or else PMB will lack enough funds to fulfilling his promises, thereby making him a Liar.

He doesn't even have ministers yet, I don't even think they have complete understanding of the situation. Lets see if his current relationship with U.S will be good enough for them to resume patronage with us.

Truth234:

He doesn't even have ministers yet, I don't even think they have complete understanding of the situation. Lets see if his current relationship with U.S will be good enough for them to resume patronage with us.

Why do you think US patronage is crucial? You forget that the US is a major oil producing country and it is also working at alternative sources of energy, any respite from them will be temporary. The country needs to strategize long term. We need to move away from emphasis on crude to its refined products that have added value and are also input for other manufacturing industries like plastics etc.

CHANCEMAN:


Why do you think US patronage is crucial? You forget that the US is a major oil producing country and it is also working at alternative sources of energy, any respite from them will be temporary. The country needs to strategize long term. We need to move away from emphasis on crude to its refined products that have added value and are also input for other manufacturing industries like plastics etc.

That is what is expected of a forward-thinking nation but sadly that is not the situation with us. If you look at our GDP ($523 billion), you will realized that agriculture made up of 40% of our total GDP while crude was just 10.1% going by $52 billion revenue generated from the sales of crude oil last year.

The truth is with the right economy strategy we we will survive without crude oil, if the tax generated by government can be properly accounted for, a nation of almost 200 million people trust me we really don't need crude oil but this is Nigeria, no long term startegy.

Truth234:


That is what is expected of a forward-thinking nation but sadly that is not the situation with us. If you look at our GDP ($523 billion), you will realized that agriculture made up of 40% of our total GDP while crude was just 10.1% going by $52 billion revenue generated from the sales of crude oil last year.

The truth is with the right economy strategy we we will survive without crude oil, if the tax generated by government can be properly accounted for, a nation of almost 200 million people trust me we really don't need crude oil but this is Nigeria, no long term startegy.

Crude oil: 10% of our GDP
Agriculture: 40% of our GDP
Tax and others: 50%

Then, we are not doing bad as a nation.
We should focus more on Agriculture and Tax.


Tax messed Greece up.

ayobase:


Crude oil: 10% of our GDP
Agriculture: 40% of our GDP
Tax and others: 50%

Then, we are not doing bad as a nation.
We should focus more on Agriculture and Tax.


Tax messed Greece up.

Exactly my point but there is more to Greece situation than just tax, the government is committed to the people and refused to tax its citizen more in order to raise fund to pay foreign loans, hence, the reason Alexis Tsipras , Prime Minister of Greece wanted part of their debt from ECB and IMF to be written off but creditors won't have any of that.

But here it is totally different, there is no outright commitment to national building, the people are not convinced the government even understand the economic situation of the nation in relation to global economy.