Facilities at phases 2-3 of the South Pars gas field, owned jointly by Iran and Qatar, are illuminated at night in Assaluyeh on Iran’s Persian Gulf coast, May 27, 2006. REUTERS/Morteza Nikoubazl

Jan H. Kalicki, Reuters: How an Iran nuclear deal means cheaper oil and why Tehran is OK with that

Reuters: The nuclear framework agreement reached with Iran in Lausanne, Switzerland, was an important milestone. Now detailed negotiations will focus on crucial details relating to safeguards and lifting international sanctions. Ending sanctions, however, leads to another critical part of Iran’s energy equation: new investments in its nonnuclear energy sector that could boost its oil and gas exports.

New investments and higher exports are big incentives for Tehran to reach a nuclear deal. The Iranian economy has been in a tailspin under the sanctions regime. It can recover only with greatly increased oil and gas exports, even at low prices.

Under favorable scenarios, Iran could increase its sanctions-constrained oil exports of 1.2 million barrels a day by about 300,000 barrels a day, drawn from its floating storage. That could add 1 million barrels a day to global supply within 12 months to 18 months. Low global growth forecasts indicate that this prospect would add, longer term, to downward pressures on oil prices — good news for consumers and challenges for producers.

WNU Editor: Low oil prices will not remain forever .... OPEC knows that, oil consumers know that, and even Iran knows that. The Iranians are playing for the long term.

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