Iran has toned down its 'we're coming back to the oil market with a vengeance' talk

Analysts have long highlighted Iran's imminent return to the oil market as a major headwind for prices.

Especially because Iran was keen on pumping a bunch of oil as soon as sanctions were lifted (which they again seemed to indicate at December's OPEC meeting.)

But as their return date fast approaches, Iran has dialed down on the aggressive talk of flooding the zone with its oil:

Iran "would not seek to distort the markets," the energy minister Bijan Zanganeh stated earlier this month.

"We will be more subtle in our approach and may gradually increase output. ... I have to say that there is no room to push prices down any further, given the level where they are, " Mohsen Qamsari, director general for international affairs of the National Iranian Oil Company (NIOC), told Reuters last week.

"This marks something of a shift from previous Iranian statements suggesting that the country was coming back to the oil markets with a vengeance and that they would not hold any barrels back, irrespective of the price consequences," observed the RBC Capital Markets team led by Helima Croft.

"It is too soon to say whether this is anything more than a rhetorical shift, but we not believe that they can pull a rabbit out of a hat and get their aging fields to produce more than an additional 500 kb/d without a new wave of investment," they added.

Notably, this shift in rhetoric comes at a time when things aren't going so great with oil prices.

Oil has been hovering in the low $30's per barrel range, and even crashed below $30/barrel on Tuesday for the first time since December 2003. Currently, WTI is trading around $31.11 per barrel, while Brent is trading around $31.54 per barrel.

And low oil prices aren't exactly ideal for Iran, as Oppenheimer's James Schumm recently noted in a research report:

"Though low oil prices hurt Saudi Arabia, they negatively impact Iran in a much greater way and it crimps Iran's ability to fund sectarian uprisings in Saudi Arabia's backyard. Essentially, [the Saudis] are forcing Iran to choose between higher oil prices and the economic prosperity that comes with it, and the desire to foment Shia uprisings in the Middle East. In essence we believe Saudi Arabia and Iran are fighting a war without tanks and jets but one with oil prices."

Still, it's important to note that rhetoric is rhetoric - not action.

So even though Iran toned down the aggressive language, ultimately what's more important is what they actually do if/when sanctions are lifted.