MARKET WATCH: Iran nuclear deal will have ‘little’ short-term impact on oil markets

The historic nuclear agreement signed by Iran and the Western powers may have little effect on the short-term oil market outlook, according to an analyst with Douglas-Westwood in London.

“Iran’s oil export ceiling remains firmly restricted at 1 million b/d, significantly lower than the pre-sanctions level of 2.5 million b/d,” said Douglas-Westwood’s Timoth Madden. “The limited relief on sanctions will make it easier for buyers to purchase Iranian crude as they can now access insurance for shipping cargoes, meaning the 37 million bbl of oil loaded in Iranian tankers stranded at sea may now more easily be absorbed by the market. Meanwhile, Asian importers are now more likely to maintain Iranian import levels as sanction waivers become easier to obtain,” Madden added.

He said, “The limited leeway on the current sanction regime will allow Iran to maintain export sales at 1 million b/d, a potential 20% increase on the average realized last year. However, the impact of these additional barrels on the market is negligible. The real effect of Iran’s potential return to the fold will only become clear in 6 months’ time when the extent and longevity of the current accord is confirmed.”

Energy prices

The New York Mercantile Exchange January crude contract gained 42¢ on Nov. 29 to close at $92.72/bbl. The February contract increased 38¢, settling at $93.01/bbl.

Heating oil for December delivery edged up less than a penny to settle at a rounded $3.05/gal on NYMEX. Reformulated gasoline stock for oxygenate blending for December delivery declined 1.42¢ to a rounded $2.68/gal.

The January natural gas contract on NYMEX added 5.9¢, settling at a rounded $3.95/MMbtu. On the US spot market, the gas price at Henry Hub, La., closed at a rounded $3.78/MMbtu on Nov. 29. No price was posted for Nov. 28 because of the Thanksgiving holiday in the US.

In London, the January ICE contract for Brent crude oil dropped $1.17 to settle at $109.69/bbl. The ICE gas oil contract for December rose by $1 to $943/tonne.

The Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes closed at $107.07/bbl on Nov. 29, a 27¢ drop from Nov. 28.

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