Talks Begin On 27 June For Iran’s ‘Re-Opening Up’
$RDS-A, $ENI, $CVX, $XOM
Businesses around the world are preparing for the largest financial bonanza since the Soviet breakup in 1991, Iran’s reopening up for business.
On that re-opening up expect large new Crude Oil and other commercial deals, and lower global Crude Oil prices.
The last stage of talks between Tehran and P5+1, begins on 27 June in Vienna. The 2 sides are working against a self imposed 30 June deadline, but most observers think the talks will go on longer.
Notwithstanding last-minute tough talk by Iranian leader Ali Khamenei, the overall expectation is that the talks will succeed.
Western business representatives of all types are pouring into Iran ahead of this settlement. In such chaotic situations, there is as much room for fraud as riches. But the sentiment is that one must at least try or lose out.
Among those 1st in line are major Oil companies, given potential access to the world’s 4th-largest petroleum reserves for the 1st time in 35 yrs.
European majors, Shell (NYSE:RDS-A) and Italy’s Eni (NYSE:ENI) acknowledged holding preliminary discussions with Tehran. BP (NYSE:BP) is not admitting it publicly, but it has held such discussions.
Given a much stricter compliance regime in the US, American companies are very cautious.
A spokesman for ExxonMobil (NYSE:XOM) said it has held no such talks because of sanctions. Chevron (NYSE:CVX) in response to a query, a spokeswoman did not say specifically whether it has or has not held such discussions, but only that the company “always act(s) in compliance with current laws and regulations.” Meaning no.
No matter, the majors has accomplished up till now, they will be in Tehran in full force as soon as a nuclear deal makes it possible.
Oil prices will likely fall immediately, and could dive. This is because Iran is likely to rapidly begin to unload 30 to 40 million bbls of its Crude Oil floating storage.
But how fast will Iran and foreign major Oil companies manage to pump more Crude out of the country’s fields?
In a report Thursday, Wood Mackenzie, an industry research firm, said it expects the process to go slow. By the end of Y 2017, Iran will have restored some 600,000 BPD of production, bringing its output to about 3.2-M BPD from about 2.6-M BPD now.
Wood Mac expects the Iranian Oil to have no significant affect on global prices. But that appears to play down what I have observed over the last year, which is how a big new supply of Crud Oil can cause the market to overshoot and damage prices. The same dynamic would come into play with the added Iranian barrels.
By Reza Hashami. CEO, Global Modern Insurance, Inc.
Paul Ebeling, Editor
HeffX-LTN
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