For the first time in four years, Iran will be allowed to export crude oil to global markets.
Economic and financial sanctions against Iran were lifted on Saturday after the International Atomic Energy Agency confirmed that the nation has removed most of its nuclear capacity (as part of the nuclear deal reached last summer with the U.S. and the EU).
Iran has gotten rid of 25,000 pounds of enriched uranium since October and has put two-thirds of its centrifuges into storage said U.S. Energy Secretary Ernest Moniz.
“On a global scale, Iran is showing to the world that it has fulfilled all its commitments under the nuclear deal despite all problems,” said policy fellow at European Council on Foreign Relations Ellie Geranmayeh. “It is proving its good faith in multinational diplomacy, and the implementation day is the first test for that.”
With the sanctions now lifted, Iranian production will likely increase in the following six to nine months as its oil fields restart. Given the amount of oil the country has in storage and on tankers, Iran could produce anywhere from 300,000 to 500,000 barrels a day almost immediately.
Crude prices are expected to decline when Iran reopens to the market. On Friday, U.S. crude settled at $29.42 a barrel on the New York Mercantile Exchange.
“Oil prices will remain under pressure for the next six months,” said Andy Lipow, president of Lipow Oil Associates. However, Lipow also added that “worldwide demand will start to get better as we move into 2016 and beyond.”
Article written by HEI contributor Aliyah Cole.