Iran nuclear talks sidelined, but set to resume after hardliner takes power

Quantum Commodity Intelligence – The prospect of the speedy return of additional Iranian barrels in the market has largely been removed this week, following reports that talks to revive the 2015 nuclear deal are on hold until power is transferred to President-elect Ebrahim Raisi in August.

The shadow of Iranian sanctions being lifted has hung over the market since April, including multiple rounds of talks in Vienna generating headlines that a deal is imminent.

Iran has even made a number of bold claims that a deal was tantalizingly close, or on at least a couple of occasions claimed that sanctions were set to be lifted, sparking sharp price movements in oil markets.  

However, according to a senior US official speaking to Reuters, it appears that Iran is not prepared to resume negotiations over coming back into compliance with the Joint Comprehensive Plan of Action (JCPOA) until hardliner Raisi is in power.

While the US and western diplomats are under pressure to revive the deal and keep tabs on Iran's nuclear ambitions, politically it may be more difficult to deal with Rasi, particularly as he as been sanctioned himself for alleged human rights abuses.

From the Iranian side, the new regime is expected to adopt a tougher stance. One Iranian official was quoted saying Raisi planned to show "less flexibility and demand more concessions" from Washington.

"They are pushing their luck tying to get a 'better deal'. There might be a minor concession, but they also might go to far and not get a deal at all," said one Middle East analyst.

Iran has already been exporting over 1 million barrels per day of crude and refined products this year, while a lifting of sanctions is expected to quickly add an additional 1.5 million bpd of oil, including condensates.

Talks are unlikely to resume until at second half of August, and possibly much later, which gives the market some respite from Iran-led headlines. Backchannel talks are likely to be ongoing, but more formal dialogue could be delayed until the start of the fourth quarter, according to some reports.

The lifting of sanctions has also weighted heavily on the thoughts and policy of the 23-member of the OPEC+ producer group, which is currently embroiled in its own deadlock on baseline production quotas.

"We've had a lot of headline-driven trading around OPEC+ and Iran, that's not going away for the second half of the year," said one trading source.