Oil Prices Slip as U.S.-Iran Nuclear Talks Continue Past Deadline

LONDON--Oil prices fell in volatile trade on Wednesday as investors tracked the U.S.-Iran nuclear talks and a buildup in U.S. oil supplies.

Brent crude for May delivery fell 0.3% to $54.95 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, light, sweet crude futures for delivery in May traded at $47.26 a barrel, down 0.8% from Tuesday's settlement.

Nuclear talks between Iran and six world powers missed the deadline for a preliminary agreement on Tuesday. But in early morning hours Wednesday, there were some signs of progress toward building a framework outlining elements of a final nuclear deal to be reached by June 30.

Russian Foreign Minister Sergei Lavrov said the sides reached agreement in principle, according to his spokeswoman. The parties would try to finalize a text later on Wednesday, she added.

Oil market participants are keeping a close watch on the negotiations because a deal could lead to the lifting of international sanctions on Iran, paving the way for more Iranian crude to flood an already oversupplied global market.

In 2011, Iran produced about 3.6 million barrels of oil a day and analysts at Phillip Futures estimate that if sanctions are lifted, production could move up again, adding as much as 0.8 million barrels a day to the global market.

"An agreement leans toward opening the flood gates to Iranian crude," said Daniel Ang, analyst at Phillip Futures.

Meanwhile, the American Petroleum Institute reported late Tuesday that U.S. crude inventories rose by 5.2 million barrels last week. The U.S. Energy Information Administration will publish its official numbers later on Wednesday and analysts polled by The Wall Street Journal expect a stockpile increase of 4.6 million barrels.

U.S. inventories are already running at an 80-year high as production has continued to increase, despite a decline in the number of drilling rigs in the U.S.

Adding to the global oversupply, OPEC's oil output in March increased by almost 400,000 barrels a day to 30.4 million barrels a day, JBC Energy estimated. The strong increase in March comes on the back of stronger production in Libya, Iraq and Saudi Arabia.

The Organization of the Petroleum Exporting Countries last year decided to keep its output target unchanged at 30 million barrels a day despite the rout in prices.

Oil prices have now fallen for three consecutive quarters. Nymex crude lost 10.6% in the January-March quarter, and has fallen by 55% over the last three quarters, while Brent crude lost 3.9% in the last quarter and has fallen by 51% over the last three quarters.

Write to Georgi Kantchev at [e-mail]

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