Talks to secure nuclear deal with Iran could be extended

The deadline for talks to secure a nuclear deal between Iran and global powers could be extended until after Easter if no concrete agreement is signed on Tuesday, the official deadline.

That’s what analysts at Danske Bank Markets think. “One of the major remaining issues is how fast the current United Nations sanctions against Iran will be phased out. This will be particularly important for the oil price,” they said.

Dankse’s analysts noted that an agreement that opens up for fast elimination of UN sanctions and increased oil supply from Iran could put downward pressure on the oil price, whereas a breakdown in the negotiations will probably push the oil price higher.

Midday in Europe, oil prices were both in retreat with Brent crude futures down 2.2% to $55.14 per barrel while Nymex crude futures fell 2% to $47.60 per barrel.

Broker Citi is more skeptical. In a research note e-mailed to clients it says Iran will not be able to raise production before 2016. The outcome of the Nigerian elections will be more important for prompt supplies, the analysts add.

Under an agreement, world leaders will ease the strict international trade blockade on Iran in return for permanent curbs on the country’s nuclear programme. Iran’s economy has suffered significantly since the sanctions were imposed.

Officials close to the deal insist the outcome of discussions is too close to call, although there is growing optimism over the prospect of a deal being secured, though an agreement may have to be extended as both parties squabble over the terms.

As Emad Mostaque, a strategist at Ecstrat put it, Iran wants a “nuclear program as a matter of national pride and nuclear weapons breakout capability as a deterrent against potential externally-catalysed regime change.”

Mostaque thinks the market impact of an Iranian nuclear deal would be most immediately anticipating the return of 1 million barrels per day of Iranian exports that disappeared a few years ago to be priced back into the market, along with expectations of rising Iranian production given they can access the market for much needed infrastructure investment.

“This is likely to put pressure on a fragile oil price and set the stage for a second bottom before the much higher levels of oil price we have predicted in the coming years (my two year target remains $130 spot Brent),” added Mostaque.