Iran deal can slash oil price expectations

Markets are still waiting for the outcome of the diplomatic talks between Iran and the P5+1 - the five permanent members of the UN Security Council (France, the US, the UK, Russia and China) and Germany after six days of intense negotiations. Oil prices have fallen by more than 7% or around USD 4/barrel since the talks started last week.

The two sides hope to reach a preliminary understanding that will allow them to enter a new phase of negotiations aiming at a final deal by 30 June. The talks are aimed at stopping Iran from gaining the capacity to develop a nuclear bomb in exchange for easing the international sanctions crippling the artery of the Iranian economy - the oil industry. 

"Oil exports account for 80% of the country's total export revenues and for 50-60% of government revenues. A reduction of the sanctions can boost Iranian oil production within months. In a market that is already flooded with oil, a positive outcome of the negotiations will increase the downward pressure on oil prices and may push the Brent price back below USD 50/barrel", said Nordea Global Research in a report on Wednesday.