How Will An Iran Deal Impact The Global Oil Market?

Analysts at Morgan Stanley Research recently polled 299 investors about the impact that a potential Iranian nuclear deal would have on the global oil market. Analyst Haythem Rashed summarized the survey results and noted important upcoming deadlines for oil investors to watch when it comes to the Iran negotiations.

Market anticipating increase in Iranian oil exports
Morgan Stanley asked poll participants how much Iranian oil exports will increase by the end of 2015 and into 2016. The most popular choice for 2015 was an incremental Iranian export increase of 200kb/d. Nearly 40 percent of respondents anticipate Iranian exports to increase by 200-300kb/d, while 15 percent of those polled see no change to Iran’s oil exports this year.

For 2016, over half of all respondents believe that Iranian oil exports will increase between 500 and 800 kb/d, and 13 percent expect a greater than 1mb/d increase in exports by the end of next year.

Potential upside to oil prices
The Morgan Stanley poll seems to indicate that the market is anticipating a large inflow of Iranian oil into the global supply in the next two years. Rashed points out the potential upside to crude oil prices if this inflow (and an Iranian nuclear deal) fails to occur.

“Given some expectations for growth in Iranian oil exports, there may be upside to oil prices if a final agreement between Iran and the P5+1 is not reached or is significantly delayed,” Rashed explains.

Shares of the United States Oil Fund ETF USO have climbed 14.6 percent in the past three months, but remain down nearly 50 percent over the past year.

Deadlines
According to the report, Iran nuclear talks are expected to extend beyond the current June 30 deadline. However, the recent U.S. Iran Nuclear Agreement Review Act requires a deal to be presented to the U.S. Congress by July 9 in order to trigger a 30-day review period.