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Goldman Sachs: Iran - A Mutually Beneficial Stalemate

OIL

Goldman Sachs note that “on August 15, Iran sent its response to the EU's 'final' proposal to revive the JCPOA, with the EU today commenting that the response was 'constructive', implying a continuation of negotiations. Issues remain, however, especially regarding continuity guarantees that the U.S. is unable and unwilling to provide given the JCPOA is not legally binding and the U.S. regards these requests as 'extraneous'.”

  • “Our view continues to be that a deal is still unlikely in the short-term, with a stalemate mutually beneficial for both sides wanting to avoid sanctions (Iran), higher oil prices (U.S.), and political backlash (U.S.). Consequently, we recently dropped an increase in Iranian exports from our monthly balances running to the end of 2023. Our view stems from the weak incentives for Iran to return to a deal given its maintaining ~1mn bpd oil exports at high prices, record levels of enrichment, and their ultimate medium-term nuclear goals.”
  • “If a deal did occur, however, we could expect a front-loaded ~1mn bpd ramp up in Iranian production from ~2.7mn bpd today although any deal is likely to have a phased implementation, with barrels unlikely to return until Q123 at the earliest. A return of Iranian supply would reduce our 2023 forecast from $125/bbl Brent by $5-10/bbl, assuming some offset from shale and OPEC+”
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Goldman Sachs note that “on August 15, Iran sent its response to the EU's 'final' proposal to revive the JCPOA, with the EU today commenting that the response was 'constructive', implying a continuation of negotiations. Issues remain, however, especially regarding continuity guarantees that the U.S. is unable and unwilling to provide given the JCPOA is not legally binding and the U.S. regards these requests as 'extraneous'.”

  • “Our view continues to be that a deal is still unlikely in the short-term, with a stalemate mutually beneficial for both sides wanting to avoid sanctions (Iran), higher oil prices (U.S.), and political backlash (U.S.). Consequently, we recently dropped an increase in Iranian exports from our monthly balances running to the end of 2023. Our view stems from the weak incentives for Iran to return to a deal given its maintaining ~1mn bpd oil exports at high prices, record levels of enrichment, and their ultimate medium-term nuclear goals.”
  • “If a deal did occur, however, we could expect a front-loaded ~1mn bpd ramp up in Iranian production from ~2.7mn bpd today although any deal is likely to have a phased implementation, with barrels unlikely to return until Q123 at the earliest. A return of Iranian supply would reduce our 2023 forecast from $125/bbl Brent by $5-10/bbl, assuming some offset from shale and OPEC+”