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Iran and G6 Come to Agreement

Reuters is reporting that the G6 and Tehran have come to an agreement, providing a link to an Iranian diplomatic source. Other Iranian sources also confirm the conclusion of the deal. After the agreement is signed, it’s expected that the sanctions against Tehran will be gradually lifted. The Islamic republic has already announced plans to sharply increase oil exports following the lifting of sanctions. The rise is increase is expected to be a rise from 1.2 to 2.3 million barrels per day.

The energy market is worried that an increase in Iranian exports will lead to a collapse of prices. Of course, in the short term the oil market is going to react to this news. Nevertheless, the grey market oil exports coming out of Iran were quite high. Now Iran will most likely start exporting this capacity officially. A more significant threat to prices is coming from the possible interest rate hike by the US Fed and, with it, an increase in the price of money. However, from a production cost and future investment cost point of view, oil prices will remain undervalued. This means that, over the long term, there is room for growth and the strengthening of oil pegged currencies.

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