News came out last recently that perhaps Iran has already improved its oil production to reach near its pre-sanctions level. This would be a huge boon for Iran. The numbers say that Iran is producing nearly 4 million bpd and exporting nearly 2.5 bpd. As a result, market watchers are hoping that Iran may now be willing to participate in the previously proposed production freeze that it so publicly rejected just a couple weeks ago. In fact, in March, Iran said that it would not consider participating in an oil production freeze until it reached pre-sanctions levels. Does this mean Iran is now willing to play? 

Not likely. Even now that it appears Iran has or is about to meet its target, the chances of an oil freeze agreement revival are slim.

First, an oil freeze agreement is still not in Iran’s interests. The agreement previously under negotiation just a few weeks ago would have frozen production at January 2016 levels, and strategically Iran cannot achieve pre-sanctions levels of oil production only to voluntarily abandon them for productions rates far below those its fellow producing countries would be agreeing to. Likewise, it would not be beneficial for Iran to freeze production at April or May levels, because just as Iran has increased production, so too have Saudi Arabia, Russia, and Iraq. Strategically, Iran must continue to increase its oil production relative to its competitors to truly return to its pre-sanctions oil market situation.

Second, Iran has offered no indication that it wants to entertain a production freeze. Just this week, following a meeting between Iranian President Hassan Rouhani and South Korean President Park Geun-Hye, Iranian Oil Minister Bijan Namdar Zangeneh, specifically stated that Iran intends to increase its oil exports to South Korea from 100,000 barrels per day in April, 2016 to 400,000 barrels per day in May, 2016. While it may be that recent Iranian exports to South Korea have spiked using pre-produced (and stored) oil, Iran will want to produce new oil to meet the demands of the relationship.