From Edith Southammakosane, ETF Securities senior analyst:

“The agreement Iran signed over the weekend with the US, Russia, China, Germany, France and the UK on its nuclear programme is a first step to ending the international embargo on Iranian exports. During a period of six months from the agreement, the six countries have agreed to suspend the next set of sanctions in exchange for proof that Iran will limit its nuclear programme.

While it is understood that no additional sanctions will be applied to Iran during this wait-and-see period, the existing embargo on Iran oil will remain in place and a failure by the country to comply with the terms of the agreement by the end of the period will likely add upward pressure on oil prices again.

“If Iran does actually meet the agreement’s criteria and if, as part of the next step, it is decided to lift the embargo on oil at the end of the six months, Iran oil production is likely to recover quite quickly to pre-embargo levels, potentially bringing OPEC annual oil production back to 30mb/d. However, even under this optimistic scenario we believe that the longer term impact on the oil price will be relatively limited.