Crude prices slipped Monday morning as negotiators closed in on a nuclear agreement with Iran that could mark the end of crude export sanctions against the oil rich nation.
According to Reuters, the United States and five other world powers are close to reaching a deal with Iran that would end some sanctions in return for a curbed nuclear development program.
Iranian officials have also demand that the U.N. lift an arms embargo and that the U.N. Security Council remove language from its resolution approving the deal that describes Iran’s program as “illegal,” the AP said.
Negotiators had hoped to reach a deal by June 30 but extended the deadline to midnight on July 14.
Although a deal may be reached tonight, some negotiators said talks could extend into the week to hash out unresolved issues.
“I cannot promise whether the remaining issues can be resolved tonight or tomorrow night,” Iranian Deputy Foreign Minister Abbas Araqchi told the Tasnim news agency.
Under the deal, Iran would allow inspectors from the International Atomic Energy Agency into the country to monitor and inspect nuclear facilities.
The country would also have to drastically cut its number of installed centrifuges, limit its stockpile of enriched material and refrain from building any new enrichment facilities for 15 years.
U.S. sanctions against Iran for terrorism, human rights abuses and ballistic missiles will remain in place under the deal, the State Department has said.
The agreement could pave the way for more Iranian crude to hit an already flooded global markets.
Western sanctions have limited Iran’s crude exports to 1 million barrels per day since 2012 from a high of 2.5 million.
The country currently produces about 3.5 million barrels of crude per day, according to OPEC.
While Iranian leaders have said they would not sign a deal unless the sanctions are lifted immediately no official timeline for rolling back the sanctions has been released.
Earlier this year, the U.S. Energy Information Administration warned that lifting Iranian oil sanctions could drop crude prices by as much as $15 per barrel in 2016.
The agency added that Iran could add another 700,000 barrels per day of production by the end of 2016, a boost that would grow global inventories by 500,000 bpd that year.
Just how large the wave of Iranian crude is and how fast that crude hits the market will depend on the final terms of the deal.
West Texas Intermediate dipped to $52.44 per barrel during the first half of the trading day while Brent crude prices fell to$56.84 per barrel before climbing back up to $58.16 per barrel.
Commerzbank told Reuters that it is “conceivable” that Brent could tumble below $55 per barrel and U.S. crude could fall below $50 per barrel if Iran’s oil sanctions are lifted.
Speaking from the negotiation site in Vienna, U.S. Secretary of State John Kerry said negotiators are open to continuing talks even if the deadline expires.
“And I emphasize, given that the work here is incredibly technical and that the stakes are very, very high, we will not rush and we will not be rushed, and we won’t let ourselves be rushed through any aspect of this. All that we are focused on is the quality of the agreement, and that is what will continue to define our work,” Kerry said.