Oil prices started to rise following early losses on Wednesday as Iran and the six world powers failed to meet the nuclear agreement deadline. Brent is up at $55.77 a barrel, on doubts Iran can unlock its oil reserves after years of western sanctions.
May futures for Brent Crude traded at $55.77 at 18:15 MSK on Wednesday, after dropping to below $55 by midday in Moscow. West Texas Intermediate blend (WTI) grew 1.74 percent to $48.43. WTI has lost 11 percent since the start of 2015, pressured by growing global oversupply.
Negotiations with Iran to settle the dispute over its nuclear program extended beyond the Tuesday deadline, as all the parties moved closer to a deal but failed to agree on some crucial details such as the lifting of UN sanctions.
On Tuesday Russian Foreign Minister Sergey Lavrov said a final deal could be expected on Wednesday, while clearing up ‘technical details’may take until June. However, not all the participants in the talks showed the same level of confidence, with a diplomat close to negotiations telling Reuters that it was “not true” that agreement was reached on all key issues, without specifying any stumbling blocks that remain. The UK Foreign Secretary Philip Hammond told journalists that the parties have reached a“broad framework of understanding” while there’s still work to do.
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Tehran hopes a draft agreement that will lift US sanctions on Iranian oil exports will soon be finalized. Iran is keen to start selling oil storage reserves, which are estimated to be between 30 and 35 million barrels. The country can increase shipments by one million barrels a day if sanctions are lifted, Iranian Oil Minister Bijan Namdar Zanganeh said in March.
Meanwhile, fears are growing that Iranian supplies will add to a global surplus that halved prices last year.
“Iran has a huge capacity to produce and people are worried about that,” the chief investment officer at Ayers Alliance Securities in Sydney, Jonathan Barratt told Bloomberg. “Especially when you’re adding that into an already oversupplied market.”
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The negotiations are opposed by some of Iran's regional rivals, most notably US allies - Israel and Saudi Arabia. “If and when Iran starts looking to produce at the pre-sanction two million barrels a day level, Saudi Arabia could respond by ramping up production to keep its market share, which could eventually push Brent towards $30 a barrel,” IHS Energy Insight vice president Victor Shum, told CNBC. "Saudi Arabia will fight to maintain its market share," he added.
The negotiations are being held in Lausanne, Switzerland, where foreign ministers from the so-called P5+1 - comprising the US, UK, France, China, Russia and Germany are meeting Iran's Mohammad Javad Zarif. The EU foreign policy chief Federica Mogherini is also there. The talks are trying to resolve a 12-year standoff between Iran and global powers over its nuclear program. Tehran was accused of pursuing a clandestine nuclear weapons program, but insists it only wants to use nuclear energy for civilian use.