Oil prices extended losses ahead of the deadline at the end of the day for Iran’s nuclear pact that would lift US economic sanctions and potentially result in a massive increase in oil exports by the Islamic country.
The self-imposed deadline for the six countries involved in the talks in Lausanne Switzerland will outline the key points of a pact constraining Iran’s nuclear program in exchange for lifting economic sanctions imposed on the country.
Light, sweet crude oil for May delivery, the US benchmark, slid 68 cents or 1.4% to $48.01 a barrel on the New York Mercantile Exchange.
Brent for May settlement dropped 69 cents or 1.2% to $55.60 a barrel on the London-based ICE futures exchange to record a 3% decline this quarter.
The global benchmark was on a $7.38 a barrel premium on West Texas Intermediate Oil while volume traded during the day was 1.5% above the 100-day average for the time of day.
Oil prices had pared morning cuts in the afternoon after the Russian foreign minister Sergei Lavrov left the talks. Officials close to the talks however confirmed to Bloomberg that the minister was due to return to the talks on Tuesday afternoon.
Any lifting of sanctions is expected to see the country’s oil exports increase by between 500,000 and 700,000 barrels per day within a year, according to the Financial Times. With the market already swollen due to US shale production, such an i9ncrease would cause a further slump in oil prices.
“The trend is lower because the global market is oversupplied,” Gene McGillian, a senior analyst at Tradition Energy in Stamford, Connecticut, told Bloomberg by phone.
“The prospect of even more oil hitting the market in the next six months because of an agreement with Iran is going to put more pressure on prices.”
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