Analysts: Americas Will Shoulder Brunt of Oil Output Cuts as Obama Gains Majority Support on Iran Deal

President Obama has said he would veto any move to block the Iran deal

U.S. President Obama has now gathered enough support to push through a proposed deal to lift sanctions against Iran, the BBC reports, a move that some are predicting will ultimately lead to a production decline across the Americas.

Last Wednesday Democrat Barbara Mikulski became the critical 34th senator to back the deal, who said that while "no deal is perfect," it was nevertheless "the best option available to block Iran from having a nuclear bomb."

The number is significant as Obama has said he would veto any move to block the deal, so 34 or more senators in favour leaves fewer than the required two-thirds to override a presidential veto.

In fact 38 senators are now understood to be in support of lifting sanctions, with the President also taking a moment on Sunday to acknowledge via Twitter the support of Colin Powell, after the former Secretary of State said "I think it is a good deal."

Bunker buyers around the world have been watching the developments closely, as many believe Iran's return to the open market will add to the ongoing volatility and downward pressure on prices.

Over the last two weeks plummeting oil prices and weak demand for bunkers has sent marine fuel prices crashing to 10-year lows, but Ship & Bunker data shows that while ports such as Houston and Rotterdam witnessed IFO380 prices under $200 per metric tonne (pmt), in that time they have also seen them spring back up to around $250 pmt creating tricky conditions for both buyers and sellers alike.

Something Has to Give

Oil producers have so far been reluctant to cut production and risk losing market share, but the resulting price decline means that, eventually, output will fall.

According to a report by A.T. Kearney Inc., North, South, and Central American oil production will shoulder the brunt of those cuts, and the region could see a decline of up to 1.1 million barrels a day (bpd) by 2020, the equivalent of a 4 percent drop in output from the region's current 27.5 million bpd.

In that time A.T. Kearney estimates the Islamic Republic's output to have increased by an average of 6 percent a year, which would see its crude and condensate output rise by about 1.5 million bpd to 4.955 million bpd in 2020.

By then oil prices should be high enough to allow those with production costs of $60 to $80 per barrel to turn a profit, the consultancy added, and in the nearer term sees Brent crude prices in the $45 to $65 per barrel range for 2016.

In June Ship & Bunker reported that Iranian oil minister Bijan Namdar Zanganeh told the Organization of Petroleum Exporting Countries (OPEC) to make room for an additional 1 million barrels a day that the country intends to produce within six months of sanctions being removed.