Oil Prices Rise as Iran Export Surge to Take Time

Oil Prices Rise as Iran Export Surge to Take Time
Oil Prices Rise as Iran Export Surge to Take Time

Oil prices increased on Wednesday as investors recognized it would take time for Iran to ramp up oil exports after its nuclear deal with six world powers, although an ongoing global crude glut kept a lid on gains.

Under the nuclear deal reached on Tuesday, sanctions imposed by the United States, the European Union and the United Nations are to be lifted in exchange for curbs on Iran's nuclear program.

 While oil prices initially fell on the news, they recovered later as it became apparent the deal would not immediately lead to a flood of new supply, Reuters reported.

Brent crude was up 27 cents at $58.78 a barrel by 0529 GMT. US futures were up 18 cents at $53.22.

"New oil will not flow from Iran until 2016 and there will probably be less of it than optimists predict," said Richard Nephew, program director for economic statecraft, sanctions and energy markets at the US Center on Global Energy Policy.

"I estimate 300,000–500,000 new barrels of oil on the market within 6-12 months after a deal begins to be implemented."

Morgan Stanley said most assessments saw 500,000-700,000 barrels per day of new supply by the first half of 2016.

Iran, a member of OPEC, has some of the world's biggest oil reserves. It exported almost 3 million barrels per day of crude at its peak, before western sanctions over its alleged ambitions to build a nuclear bomb saw shipments collapse to about 1 million bpd over the last 2-1/2 years.

Analysts, however, cautioned that the general outlook for oil markets was for prices to remain low and perhaps fall further.