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The nuclear deal that has been reached today between Iran and the West should, eventually, allow Iranian oil exports to return to their previous levels, however there is unlikely to be much additional Iranian oil hitting the market this year, Tom Pugh from Capital Economics believes.

“Once sanctions have been lifted there could well be a surge in exports in the first few months as Iran sells its stores of oil, but ramping production up to previous levels is likely to take considerably longer,” Pugh said in a report obtained by Trend.

Iran and the P5+1 have reached a nuclear deal after more than a decade of on-off negotiation, granting Tehran sanctions relief in exchange for curbs on its nuclear program.

The agreement aims to limit Iran's nuclear work for more than a decade in exchange for the gradual suspension of sanctions that have slashed Iran 's oil exports and crippled its economy.

Capital Economics’ analyst mentioned in the report that Iranian oil production has fallen dramatically since the imposition of the latest round of sanctions in early 2012. Once sanctions have been lifted, the Iranian authorities assert that the country could double exports within two months. This would be an increase of over 1 million barrels per day (bpd) to an already oversupplied market, the report said.

“Indeed, Iran has considerable quantities of crude oil in storage, both on land and at sea, which could be sold as soon as sanctions are lifted. But little is known about how large these stockpiles actually are - estimates range from 7 million to 35 million barrels,” Pugh said.

Iran’s plans to increase production to 4 million bpd within about three months are likely to prove too ambitious, according to the economist.

He said many of the country’s oil fields are aging and will require a significant amount of time and money to bring back into full production.

Without a marked increase in production it will prove extremely difficult to maintain higher exports beyond a few months, even if stockpiles prove to be at the higher end of estimates, Pugh believes.

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