How Iran Deal Talks Are Turning Oil Markets Bearish

[00:00:00]Vandana Hari, founder and chief executive officer of Vanda Insights, joins us on the phone line just to talk about the latest move in in the commodity. Vandana, good afternoon from where we where at.

[00:00:11]What are you witnessing currently in the crude oil market? And do you anticipate that there's a lot more that can happen on the downside with regard to the prices?

[00:00:21]>> Uh yes, a very good afternoon to you, too. Uh it does look after uh several false dawns and uh so much noise and contradictory signals, uh it does seem like uh all the stars are aligned again. Um seem or appear being the operative word here. Uh I was just reading uh Iran's Mehr News Agency has put out a 14-point uh agreed MOU as per Iran.

[00:00:54]Um in which some of the points mentioned there uh seem to me a bit um suspicious uh as to how the US would agree to to those, uh especially uh around uh giving Iran control, some sort of a control over the Strait of Hormuz.

[00:01:11]So, um in short, I think uh nothing is done until it's finally done, until the the signatures are there on the MOU, and we hear uh the same uh interpretation, this exactly the same news, and the same document uh from both sides of this war.

[00:01:28]I think uh but yes, um ahead of that, as uh it to be expected, the market is running ahead of the news. And as you can see, uh crude has uh has stumbled more than 4% already compared with yesterday's settlement. Um I think the I think crude is already on an anticipatory basis pricing in uh an MOU happening um sooner rather than later.

[00:01:52]>> Uh it seems like every time and you you said false dawns, I think that's an appropriate term to use.

[00:01:59]In that every instance where there was a positive update that came through or a message that suggested that this conflict was nearing its end, Brent fell pretty precipitously. The The only question is, once we have that clarity, where do you see it settling? Because ultimately this is a new landscape that commodities will trade in.

[00:02:20]>> Absolutely. I think what that tells you how fraught the entire trajectory has been and then the repeated near breakdowns of the ceasefire, the repeated skirmishes or you know, military strikes against each other.

[00:02:39]What that tells you is that both parties believe they have the upper hand. I don't think any of that has changed.

[00:02:47]Both have dug in their heels. I don't expect that to change as an equally fraught period begins once the MOU is signed, which is you know, pinning down the details, the nuances of a nuclear agreement, which is going to be even more sensitive and even even, you know, harder to to find compromises on.

[00:03:10]So, Yes, I think the MOU will be fairly under scrutiny, but probably there there'll just be a huge sigh of relief first and that's probably what you will see reflected here and is already starting to show in crude prices. The market will it's a knee-jerk sell-off first.

[00:03:31]>> Yeah.

[00:03:32]>> Yeah.

[00:03:32]>> So so Vandana, I completely agree with your assessment that until both sides don't have the same version of the deal, there are limitations to how much the markets can rejoice. But one point that stood out to me which seems fairly new is lifting sanctions on Iranian oil.

[00:03:47]Now, if that comes through, how much does it add on to the supply of crude and couple that with the Strait of Hormuz being open in 30 days? Where do you see oil prices going then? When we say they're going to come off, to what extent?

[00:04:03]>> Yeah, but look, I would wait to see what exactly is agreed with regards to the removal of sanctions because the US will want to maintain some sort of a leverage as the nuclear negotiations proceed, right?

[00:04:18]And really its main leverage aside from the blockade that it has done of Iranian ports, it's one of its principal leverages is the sanctions. So, I do expect a phased removal rather than a complete removal. What it means for supply is not really much. Iran has been pretty much supplying, exporting what it can, producing and exporting to its full potential with the only difference that most of it has been going to China at heavily discounted rates.

[00:04:49]Once the sanctions are when the sanctions are gradually lifted, Iran will begin will be able to command market prices for its crude and its crude will be available for all the countries to buy. But in terms of actual supply, at least for the you know, short to medium term, I don't see anticipate any differences, any substantial improvement in production or exports.

[00:05:14]>> Okay, thank you so much, Vandana. Always a pleasure speaking with you, Vandana Hari, founder and CEO of Vanda Insights.

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