Admittedly, Iran's return to the oil market has been on the agenda for some time and therefore does not really come as any great surprise. Nonetheless, prices were bound to react negatively in the short term in view of the negative market sentiment.
The prospect of additional oil from Iran is likely to preclude any price recovery for the foreseeable future, yet should no longer weigh so heavily on prices given that a 500,000 barrel per day increase in Iranian oil shipments which is believed to be realistic should already be priced in.
It is unlikely that the production volume will be increased significantly more sharply this year. After all, Iraq and Libya took roughly twelve months to regain their original production levels following the wars in 2003 and 2011 respectively.
"Iran was unable to invest in its oil infrastructure for several years due to the sanctions and now has to make up for this, it is likely to take more rather than less time for oil production to normalize", noted Commerzbank.