Iran deal could weigh down petchem prices
Boom in Iranian production could lead to regional oversupply
The new deal struck by Iran and the P5+1 nations could weigh down petrochemical prices, as concerns about rising supply levels persist.
“An Iran nuclear deal will lead to mayhem. Petchem prices will be pushed down due to oversupply,” a Dubai-based trader told research firm ICIS.
Iran counts ethylene, propylene and methanol amongst its key downstream products and has set itself the ambitious target of tripling its current petrochemical output from 60mn tonnes per annum, to an unprecedented 180mn tonnes per annum.
In the event that sanctions against Iran were lifted, the Islamic Republic would then be able to access huge reserves of cash from its oil sales. Iran has already pledged to invest a large proportion of this cash into boosting its downstream production.
Iran and the -5+1 nations have agreed a temporary deal to begin easing sanctions, and have put in place a deadline of the 30th June 2015 for a full deal to be reached.
“In return for Iran's actions, the international community has agreed to provide Iran with relief from certain sanctions. Our own sanctions and international sanctions imposed by the United Nations Security Council,” US President Barack Obama said.
“This relief will be phased, as Iran takes steps to adhere to the deal. If Iran violates the deal, sanctions can be snapped back into place,” Obama warned.
Iran has revealed that the previous regime of sanctions had made it hard to export its downstream products to Europe.
“We can’t sell to Europe because Western banks won’t work with us. We hope this will change once the sanctions are lifted,” said a source close to an Iranian petrochemical producer.