Iran back in the oil market: How soon can exports recover?

After nearly four months of war, Iran will be free to export its oil for the first time since 2018, if the US and the Islamic Republic reach a peace deal.

What does that mean?

First tankers already moving

Three tankers carrying a combined 5 million barrels of Iranian crude oil are reportedly already en route to buyers in Southeast Asia.

Iran has struck a deal to supply about 10 million barrels of oil to China, showing demand for Iranian oil remains intact despite years of sanctions.

Iran has a backlog of oil to move before it can pump more. Its main export terminal on Kharg Island is estimated to hold more than 30 million barrels of crude in storage – a large stockpile that can be quickly dumped on the market.

If the peace deal holds, that stockpile will help Iran ramp up exports while it repairs the war damage.

Bottlenecks

Iran may be able to increase exports quickly, but boosting production is limited by storage capacity.

Free Iranian onshore storage has reportedly fallen to 13.5 million barrels—equivalent to only about a week of production at normal rates. Production must stay low until the backlog is shifted.

Shipping capacity could also limit recovery. Many of the world's supertankers that can carry two million barrels of crude at a time are now plying other routes, including from the US Gulf of Mexico coast.

Bringing them back to the Persian Gulf will take time, and many firms will wait to see if the peace holds.

Iran must also restart shut-down wells and drill new ones to keep the oil flowing.

Cautious optimism

It could take until the end of this year or early in 2027 for Iranian oil production to return to near-normal levels.

Volumes dropped to 2.3 million barrels a day in May, down from 3.2 million barrels a day prior to the war.

But the end of sanctions on Iranian exports is a defeat for the US economic war on Iran.