by Karen Boman & Deon Daugherty, Senior Editors

The end of sanctions on Iranian oil exports will, not surprisingly, be bad news for U.S. producers, Dennis Cassidy, managing director at global, multi-industry consulting firm AlixPartners and co-head of the firm’s oil, gas and chemicals practice, told Rigzone in an interview. In the best case scenario, Iranian oil will delay the recovery in West Texas Intermediate crude prices another six to 12 months. In the worst case scenario, the United States could end up sitting on a lot of oil for several years if Iran really ramps up supply and demand tapers.

Cassidy tends to think that Iranian oil exports will begin as soon as they are legally allowed, and that the country will be preparing itself to export over the next six to 12 months. Iran, which ranks second to Saudi Arabia in terms of oil resources, has shown in the past that it can ramp up production relatively quickly and as high as the 3 million barrel per day (MMbpd) range; by comparison, the United States currently is producing 5 MMbpd.

In the short-term, the pending addition of Iranian oil to the global market will mean a lot of volatility to a nervous, anxious oil market, Cassidy noted.

“With questions remaining about whether the deal will be approved by U.S. Congress and Iranian sanctions will be lifted, the market will continue to overreact to any reports or information in its search for equilibrium,” Cassidy noted.

While Iranian oil exports is bad news for U.S. producers, international majors and oilfield service and equipment providers stand to benefit from the opening of a new market for investment, said Cassidy. Most of the majors and supermajors have at least been testing the waters in Iran, with Russian and Chinese companies seen as potential investors in Iran. Given the size and the time frame expected for projects, Cassidy doesn’t expect U.S. independents, which have inventories of U.S. prospects to drill, to invest in Iran.

“It’s hard to imagine that investors in these companies would welcome that, given that they already have enough to do.”

Amid all the questions about how Iranian oil will impact the market, little discussion has focused on demand, which will have more influence on pricing than the supply side, said Cassidy.

“One of the things that has surprised people is that demand has risen quite a bit. But the question is, is it real demand, or just the shifting of molecules across the value chain?”

In Cassidy’s view, people have just put 1 million barrels per day of incremental demand on autopilot as geopolitics took over the scene.

Limiting Iran’s nuclear ambitions for the next 10 to 15 years in exchange for a few hundred thousand barrels of oil might seem like quite the bargain relative to a few pennies on the commodities exchange.

Less than 48 hours into the deal between Iranian and U.S. negotiators, pricing fluctuations have been fairly muted, Moody’s senior analyst Terry Marshall told Rigzone.

Before it is all official, though, Congress has 60 days to make a move on the historic deal, but it might take a miracle to get a titanium majority that could stand veto-proof in both chambers. So let’s skip the hand-wringing over that one for a minute.

As Marshal explained, the impact on western commodities markets is somewhat on hold. Once all of the i’s are dotted and the t’s crossed, Iran’s market production will get scheduled and it may have an impact, albeit a fairly modest one, on the current price. Iranian oil will undoubtedly increase supply late this year and even more in 2016.

But as for commodity prices, don’t expect Iran’s hydrocarbons to move the needle much.

“It will prolong this trough we’re in,” he said. “Now, if [Iran’s] production comes on higher or stronger … but I think it’s more about a fairly prolonged period of low prices and this is one more thing to maintain that.”

The American Petroleum Institute told Rigzone the agreement could actually put an estimated one million barrels of Iranian crude on the global market each day.

“It stands in sharp contrast to the State Department’s refusal to approve the Keystone pipeline and give our closest trading partner, Canada, access to U.S. refineries,” said API spokesman Zachary Cikanek.

“At home, it brings into sharp focus the importance of preserving America’s competitive position as the world’s top oil and gas producer. By lifting our own self-imposed sanctions, we can give U.S. producers the same access to global markets and protect America’s competitive edge.”