Fundamentally, the outlook for the market is still constructive with large deficits to persist for the remainder of the year. However, there is some noise around growing supply, specifically from Iran. Iran has quietly increased its output by around 400Mbbls/d over the last year to a little over 2.9MMbbls/d, which is the highest level since late 2018. Iran has said that it will look to increase output to around 3.4MMbbl/d by the end of summer, which would leave it close to pre-sanction levels of 3.8MMbbls/d. Given much of the focus has been on Russian flows since the war, Iran has taken advantage of this to increase oil exports. This comes against the backdrop of apparently greater willingness between the US and Iran to improve diplomacy, evident with a recent deal for a prisoner swap and the release of frozen Iranian funds.
There is also further noise around the potential restart of Iraqi oil flows via the Ceyhan export terminal in Turkey. The flows were halted back in March after a court ruled in favour of the Iraqi government, which claimed that these oil flows from the Kurdish region were happening without its consent. Iraqi and Turkish officials have been meeting this week with the hope of resuming the roughly 500Mbbls/d of crude oil that flows via this route. - ING Commodities Strategy
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