By Georgi Kantchev And Nicole Friedman
Oil prices fell Tuesday as investors awaited the outcome of
Iranian nuclear talks, which could pave the way for more Iranian
crude to hit the already-oversupplied global market.
Tuesday is the deadline for Iran and six other nations to
outline the main elements of a deal constraining Iran's nuclear
program in exchange for lifting international sanctions. The
deadline for a final agreement is the end of June.
Light, sweet crude for May delivery fell 68 cents, or 1.4%, to
$48 a barrel on the New York Mercantile Exchange. Brent, the global
benchmark, slid $1.12, or 2%, to $55.17 a barrel on ICE Futures
Europe.
Many market participants worry that if sanctions are lifted,
Iran, which holds around 10% of the world's oil reserves, would
ramp up 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.
Oil prices have shed about half of their value since last summer
because of a combination of oversupply and weaker demand. Analysts
estimate that between 1 and 1.5 million barrels a day of excess
crude oil is being produced.
Despite a price rebound in February, oil futures are set to end
the first quarter of the year lower, which would mark the third
quarterly decline in a row.
But some analysts caution that even if a deal on Iran's
sanctions is reached, the impact on oil markets won't be immediate.
Beyond Iranian crude-oil inventories stored on tankers, which are
estimated to amount to 35 million barrels, "it is highly unlikely
that Iran would be able to increase production until sometime in
2016," said Ed Morse of Citigroup in a note.
A strengthening dollar weighed on crude-oil prices Tuesday. Oil
is priced in dollars, and a stronger dollar makes oil more
expensive for buyers using foreign currencies.
Traders are watching the presidential elections in Nigeria.
Votes are still being counted, and the outcome is likely to be
contested. Nigeria produced between 1.8 and 1.9 million barrels a
day of crude oil in February, according to the Organization of the
Petroleum Exporting Countries.
Instability in the oil-producing Niger Delta region "poses a
risk to the country's oil sector," wrote Eurasia Group in a note
Tuesday.
Gasoline futures fell 2.5% to $1.7560 a gallon. Diesel futures
fell 1.3% to $1.7095 a gallon.
Write to Georgi Kantchev at georgi.kantchev@wsj.com and Nicole
Friedman at nicole.friedman@wsj.com
Access Investor Kit for Citigroup, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US1729674242
Subscribe to WSJ: http://online.wsj.com?mod=djnwires