Iran and world powers reached a preliminary agreement on April 2 that set the parameters for further negotiations needed to complete an agreement by a June 30 deadline. The re-entry of more Iranian barrels could cut the agency's price projection by $5 to $15 a barrel, the EIA said Tuesday.
"If a comprehensive agreement that results in the lifting of Iranian oil-related sanctions is reached, then this could significantly change the STEO forecast for oil supply, demand, and prices," the EIA said in the report. "However, the timing and order that sanctions could be suspended is uncertain."
Iran's full return to the oil market risks delaying a recovery in prices, which have slumped by almost half since last year amid a supply glut. Iran could boost output by at least 700,000 barrels a day by the end of 2016, the EIA said. The nation produced 2.85 million barrels a day in March, according to data compiled by Bloomberg.
The EIA said in the report that West Texas Intermediate crude, the U.S. benchmark, will average $70 next year and Brent will be at $75.03. The forecasts don't take additional Iranian supply into consideration.
The additional output from Iran could lead to an annual average growth of about 500,000 barrels a day in global inventories in 2016, stressing storage capacity and pressuring prices, the EIA said. The agency projected that global stockpiles will grow by 100,000 barrels a day in 2016, without considering additional supplies from Iran.
Iran holds at least 30 million barrels in storage and could move oil out of storage more quickly during the second half of 2015 "in preparation to increase production if discussions on sanctions show progress," the EIA said.
"As a result, the global market may see incremental increases in Iran's crude oil exports before seeing a substantial increase to Iran's production," the agency said.
The pace and volume at which more Iranian oil can re-enter the market are uncertain, the EIA said.
