The informal agreement between the United States and Iran has begun to enter into force, according to Bloomberg.

The agreement comes in order to keep prices under control, and it came during months of secret diplomacy between the two countries that resulted in progress in the exchange of prisoners, and the release of Iranian frozen assets.

In its report, Bloomberg monitored the volume of Tehran’s oil exports during the last period, and also highlighted the logistical obstacles facing Iran in increasing its exports, which make the restrictions imposed on access to the international banking system difficult for Iran to obtain its money, depriving it of international shipping and insurance.

US officials secretly admit that they have gradually eased some sanctions imposed on Iranian oil sales, and Tehran has restored its production to the highest level since the embargo began five years ago, and is shipping the largest amount of its crude to China in a decade, and Iranian officials are confident they will be pumping more soon.

Bloomberg said keeping the cost of gasoline – now close to $4 a gallon in the US – under control could also help President Joe Biden’s re-election campaign in 2024.

While a State Department spokesperson said that the United States continues to implement a robust framework of oil and other sanctions against Iran, noting at the same time that export levels fluctuate regularly in response to prices and other factors.

According to Bloomberg, neither country expects to revive the 2015 agreement – abandoned by former President Donald Trump – that allowed Tehran to sell oil freely in exchange for curbing its nuclear program.

Billions of dollars in Iranian oil revenue are stuck in South Korea — developments that the Biden administration insists are unrelated, and there are even reports that Iran has dramatically slowed the process of producing enriched uranium close to weapons grade.

Bloomberg also indicated in its report that the temporary détente extends to oil trade, and although Washington is still intolerant of purchases made by most of Iran’s customers before sanctions such as South Korea, Japan or European countries, it’s comfortable about expanding sales to China.

Iranian shipments to China, the world’s largest importer, have reached 1.5 million barrels per day, the largest volume of sales in a decade.

Tanker Trucker, another consulting firm, said exports exceeded two million barrels per day, and Iran’s production rose to 3 million barrels per day in July, the highest level since 2018, according to the International Energy Agency in Paris.

According to Fernando Ferreira, director of the Washington-based advisory geopolitical risks at the Rapidan Energy Group, said that Biden is willing to look the other way in exchange for Iran putting an end to those uranium stocks.

Ferreira added, “Besides, the White House would be happy to see more barrels on the market to help keep prices under control”.

Tehran expects to increase production to 3.4 million barrels in the coming weeks, Oil Minister Javad Auchi told the energy committee of Iran’s parliament, and that number could rise to 3.6 million barrels by the end of the year.

If the country hits that figure — meaning, it’s only a few hundred thousand barrels less than Iran’s pre-sanctions production capacity of 3.8 million barrels — there won’t be much oil Tehran could offer the world in the event of a formal agreement with the United States.

According to Bloomberg, the rebound in sales is one of the most tangible signs yet that Iran – financially suffering from years of isolation – is reasserting itself on the world stage after it began mending relations with its regional rivals and strengthening ties with China, the leading power in Asia.

The oversupply comes at a fragile moment for global oil markets, with Chinese economic growth and fuel demand faltering, and undermining efforts by Iran’s peers in the OPEC+ alliance to prop up prices.

Saudi Arabia, the leader of the Organization of the Petroleum Exporting Countries, increased oil production cuts over the summer by 1 million barrels per day, however, the value of Brent crude futures has fallen 5% since hitting a six-month high in early August.

Whether Iran is able to maintain, or even increase, its exports will depend initially on how much oil can be drawn from storage.

Iran has pulled a total of 16 million barrels of this stock and what is available on tankers this month, leaving it with 80 million.

But since most of the buyers are still geographically far from Iran, Tehran will ultimately depend on China’s appetite.

Beijing is extracting Iranian barrels to fill its strategic reserves, by encouraging the deep cuts offered by Tehran to compete with Russian supplies that Europe rejects.

Traders say Iran’s two main crudes are now trading at a discount of more than $10 a barrel to Brent.

But Chinese consumption is under pressure, as the country grapples with crises ranging from youth unemployment to unrest in the real estate and banking sectors.

One senior oil executive notes that the country’s fuel use may have reached its limit for this year.

According to Bloomberg, there are still logistical obstacles; Restrictions on access to the international banking system make it difficult for Iran to get its money, and without foreign investment it will struggle to boost its production capacity.

In addition, deprived of international shipping and insurance, Tehran needs to secure enough tankers from the “dark fleet” to transport its cargoes, as the ships – often old, uninsured tankers that disable transponders to avoid detection – Also necessary for Russia, which has been barred from conventional shipping after its war in Ukraine.

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