By Georgi Kantchev
LONDON--Oil prices extended their slide on Tuesday as investors
awaited the outcome of the Iranian nuclear talks, which could pave
the way for more Iranian crude flooding the already oversupplied
global market.
Iran and six global powers set Tuesday as the deadline to agree
on a framework agreement that would outline the main elements of a
deal constraining Iran's nuclear program in exchange for lifting
international sanctions.
May-dated Brent crude fell 1.6% to $55.41 a barrel on London's
ICE Futures exchange. On the New York Mercantile Exchange, light,
sweet crude futures for delivery in May traded at $47.81 a barrel,
down 1.8% from Monday's settlement.
Russia's foreign minister, who left the nuclear talks in
Switzerland on Monday, is planning to return on Tuesday afternoon
in a sign that an agreement might be close.
Many in the oil market fear that if the sanctions are lifted,
Iran, which holds around 10% of the world's oil reserves and almost
a fifth of global gas reserves, would ramp up production and
exports and add to the global glut of oil.
"A deal on Iran could depress prices in the short-term by $3-$5
a barrel and slow down the recovery in the second half of the year"
said Giovanni Staunovo, analyst at UBS bank.
Oil has shed about half of its value since last summer because
of a combination of oversupply and weaker demand. Analysts estimate
that there are currently about 1.5 million barrels a day more
supplies than there is demand.
But some analysts cautioned that even if a deal on Iran's
sanctions is reached, the impact on oil markets won't be immediate
given the June 30 deadline for a final agreement.
Markets are also focused on Iranian inventories stored on
tankers, which are estimated to amount to 35 million barrels.
But "beyond that it is highly unlikely that Iran would be able
to increase production until sometime in 2016," said Ed Morse of
Citigroup.
Meanwhile, investors are bracing for the weekly U.S.
oil-inventory data, with the first indication coming from figures
by the American Petroleum Institute, an industry group, due later
on Tuesday. The official numbers will be released on Wednesday by
the U.S. Energy Information Administration.
U.S. inventories are currently running at their highest in 80
years. This is because of rising oil output fueled by the shale
boom, which uses methods like hydraulic fracturing and horizontal
drilling to produce oil from shale formations.
Oil-production growth in the U.S. last year was the largest
since record-keeping began in 1900, the EIA said.
Nymex reformulated gasoline blendstock for April--the benchmark
gasoline contract--fell 1.2% to $1.7798 a gallon, while ICE gasoil
for April changed hands at $526 a metric ton, down $1.50 from
Monday's settlement.
Biman Mukherji in Hong Kong and Laurence Norman in Lausanne,
Switzerland, contributed to this article.
Write to Georgi Kantchev at georgi.kantchev@wsj.com
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