The U.S. and its allies reach an agreement with Iran regarding its long contested nuclear program

Framework for a nuclear deal with Iran was decided on today. The announcement was initially made during a joint press conference by Iran’s Foreign Minister Javad Zarif and E.U. Foreign Policy Chief Federica Mogherini in Lausanne Switzerland. The framework is expected to lead to a comprehensive nuclear agreement by June 30, 2015.

The agreement will be implemented in phases. Under the terms of the agreement, Iran agreed to reduce the number of centrifuges by two-thirds, stop enriching uranium for at least 10 years and reduce stockpiles of enriched uranium by 98% for 15 years. The country will also be subject to an inspections regime with various aspects that will last for 20 years or indefinitely. During the Lausanne Switzerland press release, Mogherini said that the E.U. and U.S. will both lift sanctions related to Iran’s nuclear program, but retain a “snap-back” capability that will reinstitute sanctions if Iran does not meet its obligations under the new deal.

Adding to an oversupplied oil market

Iran’s Oil Minister, Bijan Namdar Zangeneh, said that he expects Iran’s production to double over the course of the next few months. “In case the international sanctions against Iran are lifted, 1 MMBOPD will be added to the country’s crude oil production and exports in several months,” he said in recent weeks.

Oil fell as much as 5% after the news reached the market, as many feared that lifting sanctions on Iran would add to the global supply glut. Analysts at Raymond James believe that this new supply will only reach 0.5 MMBOPD initially, but it remains to be seen how lifting sanctions all at once, rather than over time like the analysts had predicted, might affect the amount of Iranian oil brought to the market. Even if all of Iran’s production comes back at once, Raymond James expects that to be no more than 0.7 MMBOPD.

Andy Lipow, President of Lipow Oil Associates, said Iran’s oil is unlikely to reach the market until the third quarter of this year, but Brent crude prices will be tested. In his estimation, Brent crude could decline an additional $3, and eventually test $50/bbl.

The actual lifting of sanctions on Iran from the U.S. is likely to be hotly contested in the weeks and months to come, as many require Congressional approval to be removed. Many politicians on both sides of the isle were opposed to lifting sanctions in the first place, and will not want to lift all of the economic and financial restrictions against Iran at once, if at all. Some of the sanctions were also the result of executive action, meaning the president will have more flexibility in lifting those sanctions which were the result of the Executive Branch.

In a 25 minute speech given in the White House rose garden, President Obama voiced his pleasure with the deal and asked that Congress support the framework reached in Switzerland. “If this framework leads to a comprehensive deal, it will make the U.S., our allies and the world a safer place,” he said. The exact details of the agreement will be worked out between now and June.

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