'Don't panic about oil' is the message from experts, even as traders factor in big price slumps this year amid expectations for a return of Iranian crude exports.
The lifting of sanctions against Tehran in July could unleash a flood of Iranian oil into global markets in the coming months, according to commentators like JP Morgan and The Schork Report. That could further depress Brent prices, which are already 44 percent lower over the past year.
But that scenario is unlikely to pan out, warns Azlin Ahmad, crude oil editor at Argus Media. She believes meaningful volumes of Iranian crude will only hit markets in mid to late 2016, assuming a nuclear deal is reached.
"After years of under investment and aging fields, Iran's spare production capacity could be as little as around 200,000 barrels a day, although that could increase to 500,000 by the end of 2016. It's going to take some time for Iran to ramp up its production."
Even if a nuclear agreement is signed within a few weeks, it could be months before sanctions are actually lifted, she added.
Tehran is negotiating an accord with six major powers known as the P5+1 —Britain, China, France, Germany, Russia and the United States— to slash its nuclear capacity in return for sanctions relief. A deal was expected by June 30, but the deadline has now been extended to July 7.
Despite the delay, analysts are confident an agreement is in sight. Iran, home to the world's fourth largest oil reserves, will then be allowed to boost its crude exports to international markets. In March, Iranian oil minister Bijan Zanganeh said the country could add a million barrels to daily oil output "within a few months" of sanctions lifting.