Western sanctions have hamstrung Iranian oil exports, reducing the country’s most important revenue source by nearly 50 percent in just three years. The EIA reports:
Sanctions imposed by the United States and the European Union (EU) at the end of 2011 and during the summer of 2012, respectively, led to the displacement of more than 1.0 million barrels per day (b/d) of Iranian crude oil on the global market. Iran’s main buyers in Asia, Europe, and elsewhere have replaced Iranian crude oil with barrels from other members of the Organization of the Petroleum Exporting Countries (OPEC). If oil-related sanctions are lifted, Iran will look to regain export market share, competing with other OPEC members with similar crude oil grades.
In 2011 Iran was exporting 2.6 million barrels of oil per day, a far cry from current levels, which hover around 1.4 million bpd. This is the carrot the West is waving in front of Iran in the ongoing nuclear negotiations: the promise of crude flowing freely once again.
But the global market is hardly in need of another strengthened supplier. Thanks in part to American shale, a global glut has depressed prices some 40 percent below their level last summer—more oil out of Tehran could further depress prices. For OPEC, which has so far chosen not to cut production and instead endure the bear market to compete for market share, Iran’s potential export resurgence won’t be especially welcome. Most of the cartel’s petrostates are running in the red as they try to edge out non-OPEC producers; now these regimes are facing down the prospect of increased competition within their own ranks.