NEW YORK/SINGAPORE/LONDON (Reuters) - Free of international sanctions, unfettered Iranian oil exports might be expected to drive prices further below $30 a barrel.
But market participants say the removal of trade restrictions was so well trailed that price moves on Monday should be limited.
On Saturday, the U.N. nuclear watchdog said Tehran had met its commitments to curtail its nuclear programme, and the United States immediately revoked sanctions that had slashed the OPEC member's oil exports by around two million barrels per day (bpd) since their pre-sanctions 2011 peak to little more than 1 million bpd.
Growing signals from around a month ago that the move would occur earlier than traders initially expected fuelled a selloff which sent Brent crude (LCOc1) tumbling 24 percent since the beginning of the year, the biggest such fall since the financial crisis of 2008.
Iran has said that it hopes to increase its post-sanctions crude exports by around 1 million bpd within a year, with most analysts expecting an increase of 200,000-500,000 bpd within six months of restrictions ending.
"Iran is now free to sell as much oil as it wants to whomever it likes at whatever price it can get," said Richard Nephew, programme director for Economic Statecraft, Sanctions and Energy Markets at Columbia University's Centre on Global Energy Policy.
Yet most analysts don't expect a huge reaction once markets open again after the weekend.
"The Iran deal should not be a surprise to the market and has been expected for a long time. I'd argue this is priced in and already reflected in prices. May be there is a small knee jerk reaction and the market opens lower given the pervasive bearishness at the moment but I'd find it hard to believe it has a bigger effect than that," said Amrita Sen of consultancy Energy Aspects.
After selling the rumour, some dealers even wonder if a "buy the fact" rebound is in store, particularly if bearish traders opt to realise some of their profits. Big funds' short positions in New York futures (CLc1) have more than doubled to a record over 200,000 contracts since mid-October, when oil was near $50.
Oil markets reopen for business at 6 p.m. EST (2300 GMT) on Sunday, although trading volumes may be tempered by Monday's Martin Luther King Day U.S. public holiday. U.S. West Texas Intermediate futures fell nearly 6 percent on Friday to $29.42, closing below $30 for the first time since 2003.
"I think we will see a hard bounce in crude oil - two, three, four dollars back up into the mid 30s," Phillip Streible, senior market strategist at RJO Futures in Chicago, said on Friday with a weekend Iran deal all but assured.
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Others may instead focus to the imminent injection of as much as 500,000 bpd of extra Iranian crude into a global market that is already running a surplus of some 1 million bpd.
On Saturday, Iran's OPEC representative Mehdi Asali said the country would not hesitate to ramp up production, appearing to contradict comments from other senior Iranian oil officials that Iran would not flood the market at a time of global oversupply.
"We have not moderated our plans regarding increasing output when sanctions are lifted. It will be increased by 500,000 bpd, and by another 500,000 bpd shortly after that," state news agency IRNA reported.
Whether or not Iran's investment-starved oil industry can open the taps that quickly is an open question. Some analysts and industry sources say output may be slow to recover.
"I anticipate they will be able to add anywhere from 300-500 thousand barrels per day to the market, probably with an up-front spike as inventories are depleted," said Nephew, referring to unsold Iranian oil stored on over a dozen Very Large Crude Carrier (VLCC) super-tankers.
Even without Iran, however, some warn that the immediate outlook for the market is still so dire that there's likely little cause for anything more than a brief bounce, if that.
Oil economist Philip K. Verleger ticked off five major factors weighing on crude: a slowing global economy; stubbornly resilient U.S. shale drillers; the availability of last-resort oil storage; broad oversupply; and the warm winter weather that has pared heating oil use.
"All the downward pressures will remain Monday," he said. "In the real oil market - which does not include New York - prices will continue the downward trend. What happens in New York is beyond me."