Oil prices drop on potential Iranian oil for China

NEW YORK, April 7 (UPI) -- Iranian diplomacy again influenced oil prices, with indices drifting lower Tuesday in response to Tehran's efforts to sell more of its crude oil to China.

Reactions to multilateral efforts to address concerns about Iran's nuclear ambitions were fluid last week, with crude oil prices rising and falling in response to the status of negotiations in Switzerland. With a framework agreement that could spell sanctions relief in hand, Iranian officials have expressed optimism about putting more of the country's crude oil on the international market.

Iranian Oil Minister Bijan Zangeneh announced plans to head to Beijing later this week to discuss oil sales in the Chinese market, his first such visit since taking office in 2013. Iran counts China as one of its largest oil customers in the sanctions era.

Iran is limited to around 1 million barrels per day worth of oil exports under the existing sanctions regime. That's about half of its capacity and more Iranian crude oil could pressure a market already favoring the supply side.

Brent crude oil prices lost about a full percent from Monday's close to sell for around $57.50 per barrel in early trading Tuesday. Brent crude oil prices are up, however, by about 4 percent from last week, when Iranian nuclear negotiations were in full swing.

Prices are at the point where energy companies are forced to spend less on exploration and production. Goldman Sachs in a research note published late Monday said oil prices will need to stay depressed for a longer period of time in order to slow U.S. oil production growth substantially.

Oil services company Baker Hughes last week reported the number of rigs actively exploring for or producing oil and natural gas in the United States was 1,028 for the week ending April 2, down 43 percent year-on-year.

The price for West Texas Intermediate, the U.S. benchmark, declined more than 1.5 percent to $51.31 per barrel early Tuesday.