India benefits from Iran’s nuclear deal. Oil prices will fall as Iran adds to the supply as will natural gas prices as the country taps into its vast reserves. Iran would become a big market for India’s exporters, especially the pharma companies as the country sources much required drugs from Indian manufacturers. Iran has been wilting under sanctions with prices of goods skyrocketing in the country due to economic sanctions.
Iran has signed a deal with a group of six countries led by the United States which puts restrictions on the development of the nuclear bomb in Iran but allows them to follow a very small nuclear program for the purpose of peace. Iran will give up the bulk of its nuclear program, namely its enriched uranium (nuclear fuel) and its centrifuges (which turn fuel into weapons material). Iran has also agreed for invasive inspections in its nuclear program to make sure that it would not cheat in this respect.
Various sanctions existed as a result of Iran not signing the deal in the past but after they accepted the terms and conditions and signed the deal these sanctions would be removed and the country would be free to trade various products and services with other countries such as Germany, US, UK, Russia, China and France.
The economic situation of Iran is expected to become better than before as most of the capital investment was stalled due to restrictions on exports. Oil is a significant component that earns revenue for Iran and due to removal of restrictions the country is expected to increase its exports. Iran is expected to increase the exports to the tune of 0.5 million barrels per day as soon as sanctions are lifted and additional 0.5 million barrels per day six months down the line. Iran has produced an average of 2.8 million barrels per day year to date. Iran’s oil reserves are estimated to be approximately 157.8 billion barrels in capacity.
Oil prices have declined 57.5% from USD 108 per barrel in July 2014 to a low of USD 46 per barrel in January 2015 on account of US Shale Oil Production and OPEC’s decision to not cut production. Oil rebounded to USD 67 per barrel in the month of May 2015 on account of geopolitical tensions in the Middle East. Brent Crude oil price has declined to USD 57 per barrel in the month of July 2015.
Oil supply is once again expected to increase on the back of the Iran Nuclear deal as the supply from Iran would add to the existing glut in the global oil market. The supply would further increase with respect to the demand globally adding salt to the wound of Oil dependent economies. The prices for Brent crude in the international markets would accordingly trend down gradually in the near future as the lifting of sanctions for Iran would be in a phased manner and not immediate.