Sunday, November 24, 2013

Société Générale: Initial Impact on Oil Prices From Iran Deal Should Be 'Muted'

From Bloomberg via the Washington Post:

Oil Prices Seen Showing ‘Muted’ Impact From Iran Nuclear Accord
Iran’s promise to limit nuclear work in return for loosened economic sanctions will have a “muted” effect on crude prices as the nation’s oil sales stay capped, said analysts including Societe Generale SA’s Mark Keenan.

Oil exports from the Islamic republic will be held to about 1 million barrels a day under sanctions that remain in force after Iran and six world powers reached an agreement yesterday in Geneva, according to the White House. The sanctions cut Iranian crude sales by 60 percent since the start of 2012, depriving the country of more than $80 billion in revenue, U.S. President Barack Obama’s administration said in a statement.

“I doubt the deal will have any significant price impact,” given that Iran can’t boost crude sales under the accord, Gordon Kwan, Nomura Holdings Inc.’s regional head of oil and gas research, said yesterday by e-mail from Hong Kong. “The oil market will take some time to be convinced that Iran is serious in compliance before pricing out the hefty geopolitical premium.”

The six-month agreement, which offers Iran about $7 billion in relief from sanctions in exchange for curbs on its nuclear program, leaves in place banking and financial measures that have hampered the OPEC member’s crude exports. Sanctions on sales of refined products also remain, while Iran gains access to $4.2 billion in oil revenue frozen in foreign banks, the White House said.
EU Embargo

Buyers of Iranian crude that have reduced purchases won’t be required to make further cuts over the next six months under yesterday’s accord. As part of the deal, the European Union will lift a ban on insurance for tankers transporting Iranian oil, making it easier for the Persian Gulf nation’s six remaining customers to take delivery. The EU will continue to prohibit crude imports from Iran.

“The resolution doesn’t at this stage extend to the lifting of sanctions on oil exports, and as such the initial impact on the oil price is likely to be somewhat muted,” said Keenan of Societe Generale. “We can, however, expect some price weakness as the market adjusts to the future prospect that Iranian exports will resume.”...MORE
One sign the deal was going to happen, Nov. 2: 

And some commentary Nov. 6: 
If Iran can resume exporting 1mm bbl/day I'd look for a quick overreaction $20 haircut for both Brent and WTI ($105.62, $94.40). And then depending on how fast Saudi Arabia cuts production that should narrow to a $10 decline....
And Nov. 8: 

See also ZeroHedge: