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Iran and the P5+1 world powers have struck a six-month interim agreement in which the Persian nation will limit its nuclear program in exchange for an easing of international sanctions that will provide the country with $6-7B of foreign exchange.
However, "the key oil, banking, and financial sanctions architecture, remains in place," the White House said in a fact sheet.
"The EU crude oil ban will remain in effect and Iran will be held to approximately 1M bpd in sales, resulting in continuing lost sales worth an additional $4B per month," the sheet said.
Iran will eliminate uranium enriched to 20%, halt the installation of advanced centrifuges, refrain from commissioning its Arak heavy water reactor - from which plutonium can be made - and remove its stockpile of the fissile material, which is thought to be almost enough to make one nuclear bomb.
The sides now plan to spend the next six months working on a permanent deal.
The P5+1 and Iran have expressed satisfaction with the deal, but Israeli ministers have already rushed to the airwaves to denounce it.
Iran and the P5+1 world powers are due to meet again from today until Friday in an attempt to thrash out a deal in which the Persian nation would scale back its nuclear program in return for an easing of international sanctions.
While an interim deal was close last time the sides met earlier this month, President Obama has lowered expectations about the chances of an agreement this week. Much skepticism exists in Congress - where there's a push to ratchet up the sanctions - and amongst the U.S.'s allies, particularly Israel, about the suggested terms of any settlement.
However, if the sides do come to an agreement, analysts have said that oil prices could slide at the prospect of an Iranian return to the market.
WTI is +0.3% to $94.18 and Brent is flat at $106.94.
The International Energy Agency says in its annual report the U.S. will be the world’s no. 1 oil producer in 2015, surpassing Russia and Saudi Arabia, but fields in North Dakota and Texas will move past their peak in the next decade and the Middle East will reclaim its role as world leader in oil supply growth.
A high market price for oil will help stimulate drilling for light tight oil, the report says, but the resource is finite, and the low-cost suppliers are in the Middle East.
Sensitive commodity prices have rolled over in afternoon trade with Lockhart's December taper talk as good of an excuse for the move as any.
Off 2.1% to $93.14 per barrel, WTI crude (USO -1.9%) hits its lowest close since right around Memorial Day. As heating season gears up in the northeast, heating oil (UHN +0.5%) at $2.86 per gallon is about a dime cheaper than this time last year.
Gold is -1.2% to $1,265 per ounce, and now off about 10% since Labor Day. GLD -1.3%.
Democratic Senator Bob Menendez, the Chairman of the Senate Foreign Relations Committee, said the panel will look to tighten sanctions on Iran this week.
Menendez made his comments yesterday, after talks between the P5+1 world powers and the Persian nation over the latter's nuclear program stalled over the weekend.
Menendez's aim is prevent the U.S. from making too many concessions too quickly, with his stance reflecting widespread Congressional skepticism about the deal that was under discussion. Israel has also continued its criticism of the proposals.
WTI crude is -0.1% at $94.48, while Brent is +0.2% at $105.27.
High-level ministerial talks between Iran and the P5+1 world powers over the Persian nation's nuclear activities have ended without a preliminary agreement in which the country would curb its program in a return for an easing of sanctions. France objected that the proposals didn't do enough to limit Iran's program.
Of particular concern is a heavy-water reactor that Iran has been building in Arak and which would produce plutonium.
However, the sides believe they've made enough progress to hold another round and they'll go at it again in ten days, although not at the ministerial level.
Analysts had said that oil prices could plunge if an agreement were to have been reached this weekend, as seemed possible on Friday.
ClearView Partners' Kevin Book predicts Brent crude oil futures could fall as much as $12/bbl if a deal is reached to remove sanctions, which have kept ~1M bbl/day of Iranian crude out of the world market.
While a deal looks promising, the politics remain tricky; giving Iran some relief on sanctions in return for a halt to its nuclear program isn't popular in Congress or with allies including Israel.
Iran and the P5+1 world powers are close to an agreement in which the Persian nation would halt the most advanced elements of its nuclear program, including the production of weapons-grade fuel, in return for a limited easing of the sanctions that have badly hurt its economy.
The deal, which could be announced today, won't at this stage include a lowering of banking and oil sanctions, although the international negotiators could allow Iran to access $50B in crude export revenue that has been frozen in European and Asian banks.
Israel is opposed to the agreement, as are some U.S. legislators, with a Senate committee continuing to prepare a set of tough new sanctions despite the progress of talks.
WTI is flat at $94.24 a barrel, while Brent is also little changed at $103.46.
Easier monetary policy from the ECB is doing little for the commodity sector as it's being more than offset by the big Q3 GDP number in the U.S. (never mind the number will undergo a number or revisions, and we're already nearly halfway through Q4).
Gold is off 1% to $1,303 and WTI crude oil continues to provide its own easier policy, slumping 0.7% to $94.15. In the Philadelphia area at least, drivers are about ready to see a "2 handle" at the pump (UGA) for the first time in a while.
The Permian remains the largest U.S. oil producer, with output averaging ~1.3M bbl/day and rising, but it's also the most expensive U.S. shale formation in which to drill - meaning the boom could become a bust if crude moves near $70/bbl, as some analysts predict.
If oil drops to $80, wells in some parts of the Permian will become money-losers; wells drilled in the Cline Shale and Northern Mississippian Lime layers of the Permian need $96 oil to break even.
The API late yesterday reported a 3M barrel build in domestic supplies, a number the EIA is expected to confirm in its own report at 10:30 ET.
WTI crude (USO) is off 1.9% to $96.48, the lowest price since late June. Brent crude (BNO) isn't off nearly as much and the spread between the two has widened to a 6-month high of about $12 per barrel.
Behind the stock build and lower U.S. prices could be refinery maintenance shutdowns. Fewer runs mean lower demand for crude, but also mean less product - gasoline and distillate supplies are both expected to print lower in the EIA report.
It's the first time below the century mark for U.S.crude since July and is at least partly being blamed on dull demand thanks to refinery maintenance work. At the same time, domestic output is surging thanks to shale production.
November crude is off nearly $1 this morning and more than $10 since Labor Day to $99.85 per barrel.
AAA's daily report has national regular gasoline prices down to $3.349 per gallon vs. $3.486 a month ago and $3.676 a year ago.
Saudi Arabia, Kuwait, the United Arab Emirates and Qatar produced record amounts of oil on aggregate in each of the last three months as they offset problems with supplies from Iran, Libya and Nigeria.
The Gulf states produced 16.4M barrels a day in Q3, which is worth over $150B when prices are above $100 a barrel.
"Despite the (U.S.) shale revolution, the Middle East is and will remain the heart of the global oil industry for some time to come," says Fatih Birol, the International Energy Agency's chief economist.
The U.S. purchases almost 60M barrels a month from the Gulf even though American production has soared.
The Energy Information Administration will suspend the weekly publication of the Petroleum Status Report, which comes out on Wednesdays, after furloughing staff on Friday because of the government shutdown.
With its crude oil and gasoline data, the report is key for traders, who will now have to rely on commercial studies from organizations such as the American Petroleum Institute. The problem is that the API report is incomplete, while paying subscribers receive it earlier than everybody else.
The EIA will also presumably suspend its natural gas inventory report, a study that is released on Thursdays.
The move lower — which happened in the space of 2 minutes and sent the yellow metal to a three-month low — is being blamed on a market order to sell 5K gold futures contracts, Nanex tells CNBC.
"About 2,700 went off and tripped the stop logic, halting gold futures for 10 seconds while liquidity replenished. When enough liquidity returned (after 10 seconds), the balance of about 2,300 completed," Nanex remarked.
The move appears to have affected silver, platinum, and even oil.
Non-OPEC supplies are expected to increase by a near-record 1.7M barrels per day to 56.4m next year, says the IEA in its monthly report. In addition to the big supply number, the IEA also slightly trimmed its world demand estimate - now seeing an increase of 1.1M barrels to 92M barrels per day.
"If the IEA picture on the supply side is correct, there is a real risk that Brent prices (BNO) will drop below $100 a barrel during 2014," says analyst Hannes Loacker.
WTI crude -1.3% to $101.64. Brent -0.3% to $111.45.