Oil prices up over $1 as potential snag emerges in reviving Iran deal

Oil prices rose on Monday as a potential snag emerged in reviving the 2015 Iran nuclear deal that could add more oil supply, while Goldman Sachs said the case for higher prices remains intact even with increased Iran exports.

Brent crude oil futures for July rose $1.25, or 1.9%, to $67.69 a barrel by 0950 GMT, while U.S. West Texas Intermediate for July was at $64.73 a barrel, up $1.15, or 1.8%.

Oil prices fell almost 3% last week after Iran's president, Hassan Rouhani, said the United States was ready to lift sanctions on his country's oil, banking and shipping sectors.

However, the speaker of Iran's parliament said on Sunday a three-month monitoring deal between Iran and the U.N. nuclear watchdog had expired and that its access to images from inside some Iranian nuclear sites would cease.

European diplomats said last week that failure to agree an extension of the monitoring deal would plunge wider, indirect talks between Washington and Tehran on reviving the 2015 Iran nuclear deal into crisis. Those talks are due to resume in Vienna this week.

Former President Donald Trump withdrew the United States from the deal in 2018 and re-imposed sanctions.

"All in all, it seems to be only a matter of time before the sides involved put pen to paper on a new nuclear accord," said Stephen Brennock of oil broker PVM.

"Investors are bracing for a fresh wave of what will surely be heavily discounted Iranian crude ... yet for all this alarmism, an aggressive ramp up in Iranian production and exports is unlikely to stall the drawdown in global oil stocks".

Even with a potential restart of Iran exports, the case for higher oil prices remains intact due to a vaccine-driven increase in global demand, Goldman Sachs analysts said.

"Even aggressively assuming a restart in July, we estimate that Brent prices would still reach $80 per barrel in fourth quarter, 2021, with our new base case for an October restart still supporting our $80 per barrel forecast for this summer," the bank said in a note.

(Additional reporting by Jessica Jaganathan; editing by Richard Pullin)