LONDON: Brent crude oil dropped towards $55 a barrel on Tuesday as Iran and six world powers entered a final day of talks over a nuclear deal that could see the energy-rich country increase oil exports to world markets.
With a self-imposed deadline set for the end of the day, the United States, Britain, France, Germany, Russia and China ramped up the pace of negotiations with Iran in Switzerland over an outline deal on Tehran’s nuclear programme.
Disagreements on enrichment research and the pace of lifting sanctions remained as hurdles that could scupper a deal to end a 12-year standoff between Iran and the West.
Russian Foreign Minister Sergei Lavrov told reporters in Moscow he believed the talks had a good chance of success.
“The chances are high. They are probably not 100 percent but you can never be 100 percent certain of anything,” Lavrov said.
Western diplomats however played down expectations for the talks in the Swiss city of Lausanne.
Brent LCOc1 was $1.14 lower at $55.15 a barrel by 1335 GMT and was heading for a monthly drop of around 12 percent. U.S. crude CLc1 was down 67 cents at $48.01 a barrel.
Both benchmark contracts were heading for a third consecutive quarter of declines.
Oil prices extended two days of falls as investors said a deal in Lausanne could lead to an increase in Iranian crude supply to a market already oversupplied due to U.S. shale production.
“If the flood gates to Iranian crude open, (prices) will probably test this year’s lows again,” Daniel Ang, analyst at Singapore-based brokerage Phillip Futures, told Reuters Global Oil Forum.
Iran could increase oil production by around 500,000 barrels per day (bpd) within six months if sanctions are removed, and by an additional 700,000 bpd within another year, according to estimates by Facts Global Energy.
Western sanctions have limited Iranian crude oil exports to around 1 million bpd, and shipping sources say Iran is storing at least 30 million barrels of oil on a supertankers.
BNP Paribas nevertheless did not expect a large increase in Iranian oil exports.
“Whether or not there is a deal, we do not expect a flood of oil on the market as consequence. Which sanctions will be lifted and the uncertainty in the timing of lifting suggest that Iran will not be in position to significantly add to the current oversupply in the market,” BNP chief oil and commodities strategist Harry Tchilinguirian told Reuters Global Oil Forum.
Oil prices came under further pressure after a Reuters survey showed OPEC oil supply had jumped in March to its highest since October as Iraq’s exports rebounded after bad weather and Saudi Arabia pumped at close to record rates, a sign key members are sticking to their effort to regain market share.
U.S. commercial crude oil stocks are likely to have risen by 4.2 million barrels last week to a record high for a 12th week, a Reuters poll showed ahead of weekly data by the American Petroleum Institute.