Iran’s nuclear deal and how it could affect oil

As a crucial deadline in talks between the West and Iran about its nuclear program looms, analysts warned that a successful deal could further compound the glut in global oil markets.

Representatives from the U.S., U.K., France, Germany, Russia and China met once again Monday with Iranian officials at the luxury Beau-Rivage Palace hotel in Lausanne, Switzerland. Just the hint of a possible deal weighed on oil markets, with West Texas Intermediate (WTI) futures falling 1.6 percent to 48.08 a barrel by 9:00 a.m. London time, and Brent crude futures falling to $55.93 a barrel.

Here, CNBC highlights the key points surrounding a potential accord with Iran and how this could affect a commodity that has seen a dramatic fall since mid-June last year.

What deal?

The negotiations are the culmination of a 12-year standoff between the United Nations Security Council and the Middle Eastern nation. Sanctions were imposed on Iran in 2006 for its failure to halt is uranium enrichment following claims that it was trying to build a nuclear weapon. The country has repeatedly denied such claims, however, and is now seeking an end to the penalties, which have blocked the import and export of sensitive nuclear materials and frozen the assets of people involved with the program.

Meanwhile, global powers are trying to achieve a peaceful resolution which prevents Iran from building nuclear weapons and curbs it uranium enrichment, but also allows it back into the international community and relaxes the sanctions.

Will there be a deal?

With a deadline on Tuesday, March 31, negotiations are already at a key stage and are likely to continue into the eleventh hour. However, with so many potential stumbling blocks, many analysts are saying the chances of a successful accord are too close to call.

Michael Wittner, global head of oil research at Societe Generale, was a little more optimistic, however. In a research note Monday, he said there was a 70 percent chance of success. Seth Kleinman, global head of energy strategy at Citi, also said Monday that the likelihood of a comprehensive deal being done had “risen significantly.”

CNBC

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.