Oil settles at $52.20 a barrel, down 54 cents, or 1%

Workers perform maintenance on an oil pumping unit near Atyrau in Kazakhstan.
Andrey Rudakov | Bloomberg | Getty Images

Oil closed lower on Monday after a Tehran official indicated the Islamic Republic might miss another deadline in securing a nuclear deal integral to lifting Western sanctions on its crude exports.

U.S. light crude, also known as West Texas Intermediate (WTI), closed down 54 cents, or 1 percent, at $52.20 a barrel. Brent crude for August was down 75 cents at $59 a barrel, having earlier traded at a low of $56.84.

Crude futures had fallen nearly $2 a barrel earlier in the session on reports that Iran and world powers were closing in on a nuclear deal that would allow its oil to re-enter an over supplied market.

But Foreign Minister Mohammad Javad Zarif was quoted later by Iranian media as saying the talks will not be concluded on Monday as expected.

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Gasoline, which has often directed action in U.S. crude over the past six weeks on signs of runaway fuel demand in the peak summer driving season, fell 2.4 percent.

Will Iran honor a deal?
Will Iran honor a deal?

Although analysts said it would take until 2016 before Iran returns to full-scale oil exports, most estimate that there would be an export jump of around 200,000 barrels per day in the short term. The global crude market already has a 2.6 million bpd surplus.

"It's all worries about supply now," said John Kilduff, partner at New York energy hedge fund Again Capital. "It just spells glut, no matter how you look at it."

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Tehran's state media said foreign ministers from Iran and six world powers will meet at 3 p.m. EDT, three hours before the latest deadline for a nuclear deal expires. Several Western officials, however, said they were unaware of such a meeting.

European Council President Donald Tusk said euro zone leaders had "unanimously reached agreement" on a deal for Athens. Greek Prime Minister Alexis Tsipras said the debt restructuring and medium-term financing deal was worth 35 billion euros ($38.7 billion).

With supply ample and economic risks growing, several banks lowered their oil price forecasts.

Bank of America Merrill Lynch said U.S. crude prices "could soon drop well below our $50 per barrel target" for the third quarter of 2015.

Commerzbank said a fall below $55 per barrel in Brent and below $50 per barrel in U.S. crude was "conceivable."

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The global oil market should be more balanced next year as China and the developing world increase oil consumption while supply of shale oil from North America and other regions grows more slowly, OPEC said on Monday.

In its monthly report, the Organization of the Petroleum Exporting Countries said it expected world oil demand to increase by 1.34 million barrels per day (bpd) in 2016, up from growth of 1.28 million bpd this year.

This would outpace the growth of oil supply from non-OPEC sources and ultra-light oils such as condensate, increasing demand for OPEC crude oil, it said.

Separately, data from the U.S. Energy Information Administration showed oil production from the largest U.S. shale plays is forecast to plunge some 72,000 barrels per day in August compared with the previous month.

Oil production from the Permian play of West Texas and New Mexico, however, is expected to rise 5,000 bpd to 2.05 million bpd, according to the EIA's drilling productivity report.

Bakken oil production is expected to fall 22,000 bpd to 1.2 million bpd, while Eagle Ford oil production is expected to drop 55,000 bpd to 1.5 million bpd.