4 key questions about Iran’s influence on global oil prices

WTI and Brent crude oil ended higher in New York session and scored further gains in Asia today as market expected a delay in Iranian crude supplies after a nuclear accord was reached.

Brent crude was last down $1.35 a barrel, or 2.3 percent, at $56.50 a barrel.

Oil for August delivery moved down Rs 70, or 2.06 per cent, to Rs 3,333 per barrel in 789 lots.

However, the organisation also warns that a number of market challenges remain, including “still high unemployment in the eurozone in combination with the uncertainties in Greece, expectations of rising interest rates in the U.S, overcapacity amid a slowing economy in China, and on-going geopolitical issues”. It also means the country will be allowed to increase oil exports which could have a negative effect on prices.

An Iran nuclear deal could mean bad news for the Russian oil business.

A draft nuclear deal between Iran and six major powers calls for United Nations inspectors to have access to all suspect Iranian sites, including military, based on consultations between the powers and Tehran, a diplomatic source said on Tuesday.

The US Energy Information Administration estimated in May that lifting oil sanctions on Iran could bring down oil prices by $5-15 per barrel, making products like petrol, diesel, kerosene, liquefied petroleum gas and lubricants cheaper.

Ambitions to regain full capacity or expand it won’t be possible without substantial investment by foreign oil companies, which will be reluctant to re-enter Iran until the legal implications are clearer, according to London-based consultants Energy Aspects Ltd.

Last Monday saw the largest drop in oil prices in four months, largely on the back of concerns of increased Iranian oil exports, the Greek debt crisis and weakness in the Chinese stock market.

Sanctions have taken their toll on Iran’s oil fields and boasts that they could add an additional 1 million barrels of oil a day might not be true. “Details of the deal are still uncertain, but the oil market will focus on the crucial timing and scope of sanctions relief for Iran”, says Nordea Global Research.

The fall in prices has led oil firms to cut back investment in exploration, while North Sea oil has come under significant pressure.

The pan-European FTSEurofirst 300 index closed up 0.53 percent, at 1,580.34.

Al-Naimi also said he expects oil demand to pick up in the second half of 2015 while supply decreases. Under the agreement, sanctions against Tehran are to be phased out over the next few years. Conditions could worsen over time because Iran believes it will be able to double its exports within six months.

Chris Cook is of the view that: “The outcome will perhaps be the increasing use of crude oil swaps such as a swap of a Caspian blend delivered from Kazakhstan or Turkmenistan into Northern Iran in exchange for heavier crude oil delivered out of the Persian Gulf to the new generation of complex refineries in India and the Far East in particular”.