NEW YORK (Commodity Online): Iran will likely remain the most important geopolitical story in the oil markets in 2013, said Barclays Capital in a commodity snippet.

Barclays expects President Obama to redouble efforts to secure a diplomatic settlement with Iran over its nuclear program. During his first term, Obama displayed little appetite for a military strike and continually stressed the need to continue with diplomatic course while at the same time ratcheting up the economic pressure on Tehran.

P5+1 talks are expected to resume before year end, but it remains far from certain that the two sides will be able to overcome the serious obstacles that have stymied the negotiations thus far. Ultimately, a deal may hinge on whether Iran is permitted a face-saving measure, such as being allowed to enrich at 3.5 to 5% levels, which would be consistent with a civilian nuclear power program, said the British bank.

Next year may produce an important inflection point for Obama and his counterparts in Western capitals if the diplomatic track remains stalled. They may face the difficult choice of either allowing Iran to approach the brink of nuclear breakout capability or taking military action to forestall that possibility. “We believe at a minimum that there will be heightened discussion of potential Israeli strike next spring if Iran does not significantly slow its nuclear activities. This will likely exert upward pressure on oil prices,” Barclays noted.

According to Barclays, Obama’s energy policy broadly favours green energy investments, and these points were frequently highlighted during his campaign. For the oil market specifically, the focus is on energy conservation as a means to bring down gasoline consumption and prices.

Although the energy industry does not expect drilling itself to slow under the Obama administration, during the campaign a lot of concerns were raised on the pace of drilling on Federal land. The slow pace of growth in offshore drilling activity was more a result of the six month moratorium imposed following the Macondo oil spill, rather than an outright policy shift to limit drilling activity.

“We believe that rising costs and other development bottlenecks are more of a determinant of incremental drilling than outright policy frictions,” they continued.

Finally, the Obama administration has put the approval of the northern leg of the Keystone XL pipeline, which intends to bring heavy Canadian oil sands to the US, on hold for now, on environmental grounds. The decision by the State Department is expected only in the first quarter of 2013. The lack of clarity on the approval of this project implies a decreasing likelihood that US heavy crude imports to the Gulf Coast will fall, even if US domestic oil production follows its current growth trajectory, Barclays concluded.