Global crude trader Vitol Group says the United States may allow more sanctioned oil from Iran onto global markets even without reaching an agreement on the revival of the 2015 deal, amid growing pressure to reduce gas prices in America.
The latest round of talks between Iran and the remaining signatories to the 2015 Iran deal has been stalled over Washington’s refusal to rejoin the accord, with oil traders being increasingly pessimistic about the prospects of a deal.
Meanwhile, US President Joe Biden now needs to decide whether to bring down record-high pump prices in America ahead of November's midterm elections or strictly enforce sanctions on Iran's oil.
Mike Muller, head of Asia at Vitol Group, believes that “Uncle Sam might just allow a little bit more of that oil to flow.”
“If the midterms are dominated by the need to get gas prices lower in America, turning a somewhat greater blind eye to the sanctioned barrels flowing out is probably something you might expect to see,” Muller said on Sunday.
The Iran deal, officially called the Joint Comprehensive Plan of Action (JCPOA), was ditched by former US president Donald Trump in May 2018.
The Biden administration had said it is willing to undo Trump’s wrongs and rejoin the landmark deal, but it has retained the sanctions as leverage.
Tehran insists that all sanctions must first be removed in a verifiable manner before the Islamic Republic reverses its remedial measures.
Since April last year, Iran and the remaining signatories to the landmark deal have been engaged in marathon talks in the Austrian capital to salvage the accord and seek a reversal of Trump’s maximum pressure campaign against the Islamic Republic.
Despite the suspension of the talks, Bloomberg reported that oil traders are increasingly pessimistic that negotiators would strike a deal.
According to energy analysts, a new deal would lead to an additional 500,000 to 1 million barrels per day coming on to international markets, enough to weigh on prices. The report added that Iran also has nearly 100 million barrels of oil in storage that could be sold down quickly.
Crude prices have soared over 50% this year to almost $120 a barrel, mostly due to the fallout of Russia’s military operation in Ukraine.
Russia launched the military operation in late February, following the US and NATO’s failure to address its security concerns over Ukraine.