Spectre of Iran Deal Keeps Oil Price Low, Could Slide to $20

Talks have a deadline of April 1 to come up with a deal

Expectations of a deal between Iran and Western nations Wednesday were keeping downward pressure on oil prices, The Telegraph reports.

Currently, Iran's ability to produce and export oil is being constrained by a host of Western sanctions aimed at halting the country's nuclear enrichment programme.

"In case the international sanctions against Iran are lifted, 1m barrels a day will be added to the country's crude-oil production and exports in several months," said Iranian oil minister Bijan Namdar Zangeneh.

Iranian output is said to sit at around 2.7 million barrels per day (bpd) at present, of which 1 million bpd is exported.

Oil prices are currently hovering at around $50 per barrel, half the level it was at in June last year.

However, if the talks in Switzerland open up Iran's oil fields, the price of oil could drop to $20 per barrel, according to the report.

Some have doubted the extent of Iranian claims about the country's ability to ramp up production.

"After years of low investment, we doubt Iran can suddenly flood world markets with oil: the last time it produced more than the 2011 peak of 4.4m bpd was in 1978," said Charles Robertson, chief economist at Renaissance Capital.

Production Levels

However, estimates suggest that Iran has stockpiles of between 7 million and 35 million barrels of crude oil available for sale immediately should a deal be done.

The country is said to hold 9 percent of proven global oil reserves, but barriers to its ability to increase production exist.

Iran would need to attract investment from global oil majors, but the report suggests companies such as Shell and Total, who have been active in Iran before, would be likely to return quickly.

Iran's membership of OPEC is said to be a bigger likely barrier, as its ability to export is likely to be hemmed in by quotas.

Despite sanctions, bunker industry insiders have said the UAE fuel oil market "economics just don't work" without Iranian oil, which still finds its way to international buyers.