HOUSTON -- The breakthrough in nuclear talks with Iran on Thursday has the potential to cause a seismic shift in global energy markets over the long term, but energy experts said any appreciable impact on an already glutted global oil market was highly doubtful for at least six months and probably more than a year.
Since the European Union placed sanctions on Iranian oil in 2012, Iranian exports of crude have fallen by more than a million barrels a day -- more than 1 percent of global supplies. At a time when there is a daily excess of nearly 2 million barrels of supply on the world market, another million barrels a day would put further pressure on world crude prices -- which have fallen about 50 percent since June.
While the agreement reached in Switzerland was tentative, the news led traders to sell oil futures and the price of the global Brent benchmark declined by nearly 4 percent, falling below $55 a barrel. Iran has as much as 20 million barrels of crude in storage -- more than what the United States consumes in a day -- that it could potentially release on the market.
Lifting of oil sanctions has been one of Iran's main objectives because its economy is highly dependent on oil sales and the sanctions have caused cancellations and delays in several oil exploration and production projects.
"The framework agreement lays out a path to significantly increase Iranian oil exports over time," said Michael Levi, an energy expert at the Council on Foreign Relations. But he added, "You want to know how many barrels will come out of Iran next week? Zero."
The agreement does not detail which of an intricate web of financial, oil and travel sanctions will be removed first and in what order they will be lifted. And before Iran can begin to significantly add to world supplies, the United States and its allies will need to be convinced that Tehran is living up to its commitments under the tentative agreement.
Verification could be a time-consuming process, energy experts say, since modifying nuclear equipment, dismantling centrifuges and carrying out detailed inspections can take months.
And even after verification, production and exports will take more than a year to recover because the output of Iran's fields have been declining in recent years because of underinvestment and Western sanctions.
Energy analysts at Raymond James said it was unlikely Iran could realistically increase production by more than an additional half a million barrels a day by the end of 2016.
"Let's not ignore the technical issues here," said a Raymond James report this week. "Once a well is shut in, resuming production is not quite flipping a switch. It is almost always the case that the subsequent rate of production ends up being below what the well was producing before."
Iran is still among the premier oil producers in the world, and has the fourth-largest proven reserves after Saudi Arabia, Venezuela and Canada. Its largest buyers are China, India, Japan, South Korea and Turkey. Expanded exports to those countries would put price pressure on competing members of the Organization of the Petroleum Exporting Countries, particularly its archrival Saudi Arabia. With higher production, Iran could challenge the leadership of Saudi Arabia in OPEC in alliance with Iraq and Venezuela.
The agreement also was viewed as a possible harbinger of closer cooperation between the United States and Iran against the Islamic State insurgency in Iraq and perhaps of a lessening of regional tensions.
"If the supreme leader accepts the agreement and Iran complies with the requirements of the deal, and if they adopt a framework friendlier to foreign investment, then Iran's long-term future as a global supplier is significant," said David Goldwyn, who was a senior State Department energy official in the first Obama administration. "It could have a major impact on the geopolitics of both Europe and the Middle East."
Oil prices have been bouncing up and down in recent days as news from the nuclear talks alternately raised and diminished hopes of an agreement. Contradictory factors are likely to continue to move oil in a jagged direction in the coming weeks. On the one hand, oil supplies continue to build in the United States and globally. On the other, conflicts in Iraq and Libya threaten to trim their crude exports.
The sanctions on Iran have brought a steady decline in oil and natural gas revenue, to $56 billion in fiscal 2013-14 from about $118 billion in fiscal 2011-12, according to the International Monetary Fund.
But even before Western sanctions, Iranian oil production was in decline -- from 4 million barrels a day in late 2007 to 3.5 million barrels a day only four years later. International oil companies, particularly from Europe, Russia and China, have shown an interest in returning to Iran to reinvigorate the oil industry, but it could take years of negotiations and planning for a serious effort to take root. And with oil prices in decline, oil companies are generally cutting back their exploration and production budgets.
"It's going to be very slow for oil companies to go back," said Dragan Vuckovic, president of Mediterranean International, an oil service company that operates in the Middle East. "It will take at least a year. Opening up takes time."