SINGAPORE: Any nuclear deal between Iran and six world powers loosening sanctions against Tehran could flood an oversupplied oil market with more fuel, yet sectors like cement and steel would see a rise in demand as the country works to revitalise its economy.

Officials involved in ongoing negotiations said on Sunday they were close to a deal that would bring sanctions relief in exchange for curbs to Tehran’s atomic programme, although no agreement was expected before Monday.

Analysts have focused largely on oil in determining the impact on international commodities markets if sanctions are lifted. The timing of any lifting of the measures that have cut Iran’s crude exports as well as a United Nations Security Council arms embargo and ban on its ballistic missile programme have been among the major sticking points on reaching a deal.

But even with a diplomatic agreement this week it would take time for Iran to start exporting large amounts of crude again as the sanctions on exports would first need to be formally lifted and Iran’s crumbling oil infrastructure modernised.

“They can add about 200,000 bpd, which is not a significant volume,” said Nick Sharma, managing director at research & consulting firm IHS, estimating that it would take at least 18 months for Iran to add another million bpd to exports.

Japan’s government-affiliated Institute of Energy Economics said that if there was a deal Iran’s oil output might rise by 700,000-800,000 barrels bpd by the second half of 2016.

Iran, a member of the Organisation of the Petroleum Exporting Countries (Opec) has some of the world’s biggest oil reserves. It exported almost 3 million barrels per day (bpd) of crude at its peak, before Western sanctions over its alleged ambitions to build a nuclear bomb saw shipments collapse to about a million bpd over the last 2-1/2 years.

Published in Dawn ,July 14th, 2015

On a mobile phone? Get the Dawn Mobile App: Apple Store | Google Play