With the deadline for peace talks fast approaching, the actual amount of Iranian oil that could reach markets may not be the torrent some predict

The March 31 deadline for a nuclear deal with Tehran has arrived, and the market is watching.

Many worry that lifting sanctions, initially imposed due to disagreements concerning Iran’s nuclear program, would let Iran’s remaining production capacity race back to the market, further depressing prices already suffering from a supply glut. Iranian oil production averaged 3.58 MMBOPD in 2011, according to an analyst note from Pavel Molchanov and Marshall Adkins at Raymond James, before sanctions were placed on Iran limiting oil exports to just 1 MMBOPD.

Iran’s own oil minister, Bijan Namdar Zangeneh, predicts that production will double rather quickly, reports The Telegraph. “In case the international sanctions against Iran are lifted, 1 MMBOPD will be added to the country’s crude oil production and exports in several months,” he said in recent weeks.

While an increase of any amount would certainly hurt oil prices, the lifting of sanctions on Iran is unlikely to cause a sudden influx of a million barrels or more of oil, according to Raymond James. The note released by the research firm says, “0.7 MMBOPD is the maximum amount of Iranian oil that could eventually resurface if sanctions were to be completely lifted.” This, of course, is still a considerable amount of oil, but the chances of it all coming back to the market at once are low.

Iran’s export restrictions are still predicated on a political agreement regarding its nuclear program. The major powers negotiating the lifting of sanctions on Iran are unlikely to simply remove all export limits at once, as this would take away any leverage to ensure that a nuclear agreement is followed. Molchanov and Adkins agree, saying “We believe the most realistic potential supply increase would be in the 0.5 MMBOPD range by the end of 2016.”

Iran

Iran will have to deal with other constraints before adding its oil back into the global pool, such as overcoming technical restrictions like bringing shut-in wells back online. Iran is also a member of OPEC, which maintains a quota, and it’s unlikely that Saudi Arabia would be willing to support any increase in Iranian exports.

This all assumes that a deal is reached later today. With disagreement over enrichment research and the pace of lifting sanctions still preventing a final agreement from being reached, the end verdict remains unclear. U.S. State Department spokeswoman Marie Harf put the odds at 50-50. “When you’ve barely 24 hours to announce a deal, it’s not very convincing to hear that you’ve got just a 50-50 chance,” said John Kilduff, partner at New York energy hedge fund Again Capital.

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