Even as officials set further talks in June and analysts questioned when the OPEC member will be allowed to export more crude, Brent oil fell 4 % last Thursday after a preliminary pact between Iran and global powers on Tehran’s nuclear program.
For over a week now, Iran has tried to agree with 6 world powers with regards to concessions to its nuclear program to remove US-led sanctions that have split its oil exports.
Iranian Foreign Minister Javad Zarif told a news conference, under a “future comprehensive deal”, set to be agreed by June 30, Iran sanctions will halt after it complies with nuclear-related provisions.
Phil Flynn, analyst at Price Futures Group in Chicago said, “If nothing is going to be signed until June, something could go wrong between now and then.”
An adviser of former US president George Bush, Bob McNally, heads energy research firm Rapidan Group, noted Iran will need much patience as the “sanctions are not likely to be lifted until late 2015 or early 2016, though we could see slippage beforehand.”
The more widely-used global benchmark for oil, North Sea Brent crude futures, settled down $2.15, or 3.8 per cent, at $54.95 a barrel, almost $1 above the session low.
US crude futures settled down 95 cents, or 2 per cent, at $49.14 a barrel, after falling nearly $2 earlier.
Dominick Chirichella, senior partner at the Energy Management Institute in New York said, “I think the market over reacted and is now sitting back a little to think there is a lot more work to be done.”
Iran would shut down more than two-thirds of its centrifuges producing uranium which can be used to create a bomb, dismantle a plutonium producing reactor and accept intrusive verification, under the preliminary deal. Iran also needs to limit for 10 years enrichment of uranium.
Sanctions have cut Iran’s oil exports from 2.5 million bpd in 2012, to about 1.1 million barrels per day. The OPEC nation is keeping AROUND 30 million barrels of crude on fleet of tankers ready for shipment when allowed, into a fully saturated market. New York energy hedge fund partner, John Kilduff said since Iran was certain to export more oil at some point, it was time other Saudi Arabia led members of OPEC deliberated cutting their production.
Began in June 2014, the selloff in oil, accelerated in November after the Saudis convinced the broader group within OPEC to stick to its output and defend market share. Brent crashed from 2014 peaks above $115 and US crude tumbled from above $107.