WASHINGTON — The framework agreement over Iran's nuclear program could lead to a deluge of Iranian oil on the global market, with the potential to drive oil prices down further than they've already plummeted.
But it won't happen soon. Even if the deal outlined Thursday doesn't fall apart before the details are worked out, it's likely to be at least a year before international sanctions against Iran are lifted to allow its oil to be shipped, according to energy experts.
"I am not very optimistic that we'll see this massive flood of Iranian oil on the market anytime soon," said Phil Flynn, senior energy analyst for the Price Futures Group.
The eventual impact of letting Iranian oil on the market would be huge. Iran holds the world's fourth-largest proven oil reserves, but its production has dropped because of the sanctions, especially a European Union ban on importing Iranian oil. Iran exported 2.5 million barrels of oil a day before the sanctions were imposed. It's now down to 1.1 million.
Iran is desperate to ease the sanctions, as crude-oil exports account for 85 percent of its government revenue, according to a report from Roubini Global Economics, an analysis firm. It's storing millions of barrels of oil on supertankers in the Persian Gulf, just waiting for permission to sell.
"If the sanctions were lifted today it would have a major impact," Flynn said. "They have miles of tankers filled with oil. It would be like a fire sale into a global market already oversupplied with oil."
The nuclear agreement with Iran, though, is just a framework, with the specifics to be negotiated by June 30. The unresolved details include the exact process for lifting sanctions and, given earlier delays in the talks, the negotiations might drag beyond the deadline.
Analysts said the deal also appears to demand that before the sanctions are lifted the International Atomic Energy Agency must certify that Iran is complying, including allowing inspections and removing centrifuges used for nuclear enrichment. It's not clear how long that would take.
"There were some expectations that Iranian oil could come back to the market very quickly, and this is clearly not going to happen," said Raymond James energy analyst Pavel Molchanov.
The toughest requirement for Iran to meet might be clarifying past research it's suspected of conducting on missile-borne nuclear warheads, ClearView Energy Partners said in a research note.
The energy research firm doesn't expect Iranian oil to hit the world market before next year.
There's already a global oil glut, which has led prices to plummet by more than half since last summer. The unleashing of Iranian oil would send them tumbling further, which is good for drivers but bad for the energy industry and governments that rely on oil revenue. The international benchmark price of oil fell nearly 4 percent after news of the Iran framework agreement.
Flynn, of the Price Futures Group, said the energy market could be different by the time the sanctions were lifted, and it's not guaranteed that introducing Iranian oil is going to send prices on a nosedive.
He said he thought the global demand for oil would rise with central bank efforts to stimulate economies in Europe and China. And Saudi Arabia would need to decide whether it was willing to cut its oil production to make room for Iran and prevent the global price from tanking.
Saudi Arabia and Iran are backing different factions in the war in Yemen, but they're both members of the Organization of the Petroleum Exporting Countries. Flynn cited a traditional understanding in OPEC that if a country can't produce its oil quota and other members take its market share, they're supposed to pull back when that country is ready to resume pumping.
"It will be interesting to see if they will separate the Yemen proxy-war politics from the OPEC politics for the sake of unity in the cartel," he said.
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©2015 McClatchy Washington Bureau
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