Signs of economic recovery

Iran's return to the world oil market has helped increase oil supplies, promising economic recovery for this Islamic country.

Source: REUTERS

The Organization of the Petroleum Exporting Countries (OPEC) Secretary General Haitham Al Ghais said the group would welcome Iran’s full return to the oil market once sanctions against the country are lifted. Ghais added that Iran has the capacity to increase its oil production significantly in a short period of time, expressing his confidence that Iran is a responsible member of OPEC. Ghais is sure that all parties will cooperate well and synchronously to ensure that the market remains balanced as OPEC has done for many years.

Earlier, in March, Saudi Arabia and Iran announced the restoration of diplomatic relations after years of tension, in a deal brokered by China, the world's second largest oil consumer. This means that Iran has a sufficient legal basis to expand its oil export market to the world, increasing the world's oil supply.

Remember, in a surprise move in early April 2023, Saudi Arabia and other members of OPEC+ (a group that includes OPEC and major producers outside the bloc) announced an additional oil production cut of about 1.2 million barrels per day. That decision brought the total production cut volume of OPEC+ to 3.66 million barrels/day, according to calculations by Reuters news agency. This caused world oil prices to suddenly increase, causing many countries around the world to fall into difficulty.

Regarding OPEC's decision to voluntarily cut production and its impact on oil prices, Secretary General Ghais said that OPEC does not target a specific price level. Every action and every decision of the group is made to balance global oil demand and supply.

Iran has underground oil reserves of about 132.5 billion barrels (about 11% of the world's reserves), is the world's second largest oil producer after Saudi Arabia and has the world's second largest natural gas reserves, about 15%, after Russia. However, this Islamic country has been sanctioned by the US and the United Nations (UN) regarding its nuclear issue.

Accordingly, in 2018, after the US withdrew from the nuclear agreement between Iran and the P5+1 group (including the UK, France, the US, Russia, China and Germany) signed in 2015 and re-imposed sanctions on Iran, Iran's oil exports were significantly affected as many countries stopped buying oil from this country.

Most recently, on March 9, the US also imposed additional sanctions on about 39 entities that Washington said facilitated Iran's access to the global financial system. Former US Treasury official Brian O'Toole said that this move by the US will continue to affect Iran's oil and gas exports.

However, despite US and UN sanctions, Iran continues to export oil in various ways. Notably, in 2022, the country's oil exports increased by 83 million barrels compared to the previous year and increased by 190 million barrels compared to March 2021 levels.

Iran's Tasnim news agency quoted Oil Minister Javad Owji as saying that the country's oil exports have reached their highest level in four years, since 2018, when the US reimposed sanctions on Iran.

In mid-May 2023, Iran and Russia signed 10 cooperation documents in the oil industry in the capital Tehran. The Shana news agency, affiliated with the Iranian Oil Ministry, said the newly signed documents included six memorandums of understanding (MoUs), two contracts, an agreement and a roadmap related to bilateral cooperation in the fields of industry, technology transfer and enhanced oil recovery.

Iran's return to the oil market after sanctions has opened up prospects for this Islamic country to soon restore its economy to match its position as one of the world's leading oil nations.

HN synthesis

Source link