Oil market will be able to accommodate Iran’s maximum oil output of around 3.9 million to 4 million barrels a day. Iran has been subject to tough U.S. sanctions since 2018, when the administration of then-President Donald Trump unilaterally withdrew from an international deal that restricted the Middle Eastern country’s nuclear activities. President Joe Biden is expected to seek the restoration of that accord and officials in Tehran have expressed the hope he will ease restrictions on its petroleum sales. But for now, the sanctions are still in place and any buyer of Iranian crude would face the same legal and financial penalties that have deterred most potential customers over the past few years.
Output stood at 1.99 million barrels a day in December, down by almost 50% compared with the months before Trump’s move. Many Iranian oil tankers switched off their transponders soon after the measures were announced, making it harder to quantify the impact on exports. Tehran, which has been ramping up its nuclear activity in defiance of U.S. pressure, has said it wouldn’t restore its compliance until sanctions are lifted. Announcing strong export levels and ambitious targets could be part of the negotiating process. Iran has demonstrated in the past a very strong ability to bring oil back to the market, although we think that one-to-two months is very optimistic. China already showed some readiness to continue purchases from Iran even at the height of sanctions, and Indian customers could return too, Booth said. Production cuts by Iran’s counterparts in OPEC+, such as Saudi Arabia, may have created a gap for the Islamic Republic to fill.