Although oil prices declined on Tuesday after Iran and six other countries announced their agreement to limit Tehran’s nuclear program, there will not be much of an impact on prices in the next few months until the deal is completed, said Tony Starkey, energy analysis manager Bentek Energy, the Denver-based unit of Platts, an energy and metals data provider.
The agreement will lift the previous sanction on Iran to export oil, but “no one expects additional barrels to physically hit the market” until 2016, he said.
Even without the pressures of Iran and weakening of Chinese demand contributing to the glut of oil and the impact of the Federal Reserve raising interest rates, the current oversupply is “significant and won’t clear anytime soon,” Starkey said. Prices will remain volatile, and West Texas Intermediate (WTI) crude oil prices will remain capped at $60 to $65 per barrel “to the upside over the next six months to a year,” he said.
While the stock markets have already begun to factor the impending deal into the current price of oil, other aspects such as the length of time it will take to verify and remove all sanctions have not been considered yet, said Matthew Tuttle, CEO of Tuttle Tactical Management, based in Stamford, Conn.
“Iran’s production will be released slowly back into supply,” he said. “Tankers will benefit, since they continue to pump and need a place to store.”