LONDON: Global oil prices sank on Monday as traders mulled a potential deal over key oil producer Iran’s controversial nuclear energy programme that could worsen the global supply glut, analysts said.

Foreign ministers of Iran and major world powers meeting in the Swiss city of Lausanne raced to beat a midnight Tuesday deadline to nail down a framework deal they hope will put an atomic bomb out of Tehran’s reach.

In late afternoon London deals on Monday, Brent North Sea crude for delivery in May slid 89 cents to $55.42 per barrel.

US benchmark West Texas Intermediate (WTI) for May shed 60 cents to $48.27 a barrel.

“Oil prices are likely to remain under pressure until at least mid-week, by which time agreement is set to be reached in the ongoing nuclear talks with Iran,” said Commerzbank analyst Carsten Fritsch.

“If sanctions are eased, which would probably then be the case, additional oil from Iran would flood the market, increasing the existing oversupply or preventing it from being reduced.”

Foreign ministers from the United States, China, Britain, France, Russia and Germany – the so-called P5+1 – met with Iranian negotiators on Monday.

They want Iran to scale back its nuclear programme to give the world ample notice of any dash to make the bomb and end a crisis that has threatened to escalate dangerously for 12 years.

The diplomatically isolated Islamic republic denies wanting nuclear weapons and is calling for the lifting of sanctions that have strangled its lifeblood oil exports and its access to the global financial system.

The oil market also fell on Monday as an oversupplied market offset concerns over unrest in the crude-rich Middle East, where Saudi-led warplanes have struck rebel targets in Yemen.

“Crude oil extended losses despite more trouble in Yemen as it becomes clear supply-lines won’t be disrupted by the conflict,” added CMC Markets analyst Jasper Lawler.

“Focus is shifting to Iranian nuclear talks that, should a deal be struck, (would) lead to the lifting of sanctions and add to the global oil supply glut. “Crude oil prices have collapsed by as much as 60 per cent since June on the back of a ballooning supply glut.

The oil market had plunged by more than two dollars on Friday, giving back some gains from a two-day surge, as traders kept an eye on the Saudi-led air assault against Shiite rebels in Yemen.

“Crude oil prices remain under pressure,” added Myrto Sokou, senior energy analyst at the Sucden Financial brokerage in London.

“The ongoing tensions in the Middle East have failed to provide signs of support in the oil market as bearish crude oil fundamentals continue to weigh heavily on market sentiment.”

Published in Dawn, March 31st, 2015

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