Iran set to rejoin the oil market 'stronger': Zanganeh

Iran has significantly increased its oil exports in recent days and is preparing for a strong return to the market if US sanctions are lifted, according to Iranian oil minister Bijan Namdar Zanganeh.

"We will return to the market stronger than before, sooner than you might think," Zanganeh said at an industry event, adding that Iran's oil exports have "increased sharply in recent days".

Zanganeh's comments, reported by the oil ministry's Shana news agency, are difficult to substantiate. It is hard to monitor Iranian oil exports with regular tracking data because shipments are frequently conducted by state-owned vessels that turn off their transmitters. Vortexa data show Iranian crude and condensate exports averaged 163,000 b/d in the fourth quarter of 2020, while Argus estimates that Iranian crude production increased by 20,000 b/d to 2mn b/d last month.

Joe Biden's victory in November's US presidential election paves the way for a marked shift in Washington's foreign policy and has raised the prospect of US sanctions on Iran's oil exports being lifted. But the Biden administration is tempering expectations for quick results, insisting that Iran must return to full compliance with its commitments under the 2015 nuclear deal if sanctions are to be relaxed. Tehran expects sanctions relief before it resumes its obligations with the nuclear deal. "The ball is in the US' and Washington's court," Iran's president Hassan Rohani said earlier this week.

The reintroduction of sanctions on Iran by former US president Donald Trump's administration in 2018 removed roughly 2mn b/d of Iranian oil exports from the market. Several buyers substituted Iranian crude with additional Saudi and Iraqi volumes. China remained one of the few outlets for Iranian crude throughout the restrictions, and the odd cargo has headed to Syria as well.

Some traders have told Argus that if sanctions are lifted, Iranian crude is likely to make a slow return to the European market as regional banks may delay brokering the necessary financing arrangements until they are certain there is no risk of breaching US regulations. But Zanganeh is confident Iran will have no problem finding buyers.

"I am not worried about regaining Iran's lost oil market share, and oil buyers do not limit themselves to one or two sellers," he said. "In these three years, we have become stronger and more powerful than ever in marketing and transferring money and receiving money, and if the sanctions are lifted, we will enter the market strongly and reach maximum production in the shortest possible time."

The prospect of Iran turning on the taps comes as fellow Opec members and rival sour crude producers Saudi Arabia and Iraq prepare to rein in their output. Saudi Arabia has volunteered to produce 1mn b/d below its Opec+ quota in February and March, while Iraq still has to compensate for exceeding its cap in previous months. Iran is exempt from Opec+ output cuts.

By Ruxandra Iordache