Oil skids on Iran 'framework' deal; pares losses as talks continue
By Barani Krishnan NEW YORK (Reuters) - Oil tumbled as much as 5 percent on Thursday as Iran and world powers achieved a preliminary pact on Tehran's nuclear programme but pared losses after officials said talks for a final agreement will continue through June. Iran is banking on a deal that would remove Western sanctions on its oil exports. The OPEC nation produces about 2.8 million barrels per day, according to a Reuters survey, but exports only 1 million bpd because of sanctions. It is keeping about 30 million barrels of crude on a fleet of tankers ready to be shipped when allowed, into a market already flooded with supply. The sanctions against Iran will come off under a "future comprehensive deal" to be agreed by June 30, Iranian Foreign Minister Javad Zarif told a news conference in Lausanne, Switzerland, where representatives of Tehran and six world powers met. Oil fell from the start of the day but trading was choppy, as prices tumbled first on news of the preliminary nuclear deal, before recovering somewhat on realization that the talks will drag till June. "The market overreacted and is now sitting back a little to think there is a lot more work to be done," said Dominick Chirichella, senior partner at the Energy Management Institute, New York. Futures of North Sea Brent crude , the more widely-used global benchmark for oil, were down $2.30, or 4.1 percent, at $54.80 a barrel by 1:35 p.m. EDT (1735 GMT), after hitting a session low of $54. U.S. crude futures settled down 95 cents, or 2 percent, at $49.14 a barrel, after falling nearly $2. John Kilduff, partner at New York energy hedge fund Again Capital, said increased supplies from Iran were a given, and it was time other members of OPEC led by Saudi Arabia consider cutting their production. The selloff in oil, which began in June 2014, accelerated in November, after OPEC declined to trim output in defence of its market share. Brent crashed from 2014 peaks above $115 and U.S. crude tumbled from above $107. "This is the start of the last chapter of the year-long oil price rout, as a supply response will be necessary from OPEC," Kilduff said. "If the U.S. tries to hold the sanctions in place, the U.S. will be likely be very much alone." (Additional reporting by Christopher Johnson in London and Jacob Gronholt-Pedersen in Singapore; editing by Marguerita Choy and Grant McCool)
