TEHRAN, April 2 (UPI) -- The cost of crude oil is already lower than it has been for years, and analysts expect it to dive even lower if Western powers and Iran make good on a tentative agreement reached Thursday.
The United States and five ally nations, known as the 5+1, reached a consensus Thursday on a framework of the deal -- which will place severe restrictions on Iran's nuclear program and lift crippling economic sanctions against Tehran.
A fully-outlined deal still must be reached by the end of June, but Thursday's agreement hammered out some of the details of the framework -- like re-purposing Tehran's nuclear program to focus on research instead of weapons, and subjecting activity at the program to inspection by the International Atomic Energy Agency for a period of ten years.
If the deal is fully ratified sometime before June 30, Western powers will substantially ease economic sanctions placed on the Iranian government years ago. Such a lifting of sanctions will allow the oil-rich nation to introduce a lot more of its crude into the world market -- millions of barrels of oil that Iran has had to keep in storage since 2012.
Naturally, the more oil that's available on the market, the lower its cost will be. In fact, some analysts expect price drops subsequent to a deal to reach record lows. But, they say, those cost dips probably won't be felt for at least several months -- and quite possibly for more than a year.
"The framework agreement lays out a path to significantly increase Iranian oil exports over time," energy analyst Michael Levi said in a New York Times report Thursday. "You want to know how many barrels will come out of Iran next week? Zero."
One reason why the oil fruits of the deal may not be felt for some time, experts say, is because it has not yet been determined exactly which sanctions will be lifted, by how much, and in what order they will be eased.
Also, the 5+1 will likely stipulate as part of the deal Iran's compliance with the restrictions on its nuclear program. In other words, the United States and its ally nations will probably want to make sure Tehran is satisfactorily holding up its end of the bargain before starting to eliminate any of the sanctions.
And, experts say, no one knows exactly how long that could take. Consider the fact that modifying nuclear equipment, tearing down centrifuges and carrying out highly-detailed inspections can take months under normal circumstances, the Times report said.
In the meantime, crude futures are expected to remain around the $50 per barrel mark. Oil prices fell Thursday after federal data showed commercial crude inventories at their highest levels in 80 years.
If crude levels remain as low as they expect, analysts said gasoline prices should soon fall to the $2 level -- which was seen in the U.S. just a couple of months ago.
After market close Thursday, that cost of U.S. crude futures was down nearly two percent to $49.14 per barrel. Last June, at its 12-month high, it was at just under $100 per barrel. The five-year high, in April 2011, was $106.27.
The all-time high for crude is about $148 per barrel, which was reached in July 2008. The last time crude fell under $50 per barrel was February 2009.
"You are going to see new lows in crude oil because the Iranians are going to be extraordinarily aggressive in selling. They have no choice," investor Dennis Gartman said.