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By Bloomberg

Oil pared its biggest decline since February as signs Iran and world powers will miss their Tuesday deadline for a nuclear deal damped expectations that sanctioned crude will soon return to global markets.

Futures rose as much as 1.6 percent in New York. Countries negotiating with Iran said an agreement that could lift sanctions isn’t assured even as differences between negotiators in Vienna continued to narrow. Global refining margins will drop later this year amid a fuels glut, while OPEC output further outpaces demand growth, Goldman Sachs Group Inc. predicted.

Oil is trading at the lowest level since April as investors avoid risky assets amid the Greek crisis and analysts warn of a persisting surplus. While U.S. crude inventories are forecast to have fallen last week, supplies are still about 20 percent above the five-year average level for this time of year.

“The question really then is how quickly can the sanctions come off” if there’s an agreement, Paul Stevens, distinguished fellow at London-based Chatham House, said by phone. “It’s going to take a lot longer than a lot of people think. And then we get to the more medium-term issue of how quickly can the Iranians restore their production.”

West Texas Intermediate for August delivery climbed as much as 87 cents to $53.40 a barrel in electronic trading on the New York Mercantile Exchange and was at $53.99 at 11:46 a.m. London time. The contract decreased 7.7 percent Monday, the most since Feb. 4, to close at $52.53. The day included trades from July 3. Total volume was in line with the 100-day average for the time of day.

Nuclear Deal

Brent for August settlement gained as much as $1.14, or 2 percent, to $57.68 a barrel on the London-based ICE Futures Europe exchange. It slid $3.78 to $56.54 Monday, the lowest close since April 8. The European benchmark crude traded at a $4.31 premium to WTI.

U.S. Secretary of State John Kerry and Iranian Foreign Minister Mohammad Javad Zarif held talks until early Tuesday in Vienna, along with their counterparts from China, France, Germany, Russia and the U.K. There’s an agreement on the main body of a nuclear accord, while negotiations continue on an annex related to a new United Nations Security Council resolution, according to Iran’s Etemaad newspaper.

Unrealistic Ambitions

Iran’s plan to sell more crude remains a long way off, Goldman, Bank of America Corp. and Societe Generale SA said last week. Its goal of boosting exports by 50 percent would require an extra 500,000 barrels a day of production, which the banks project will take six to 12 months as the country revives aging oil wells.

Oil prices have been driven lower by a global supply surplus, rather than an escalation of the Greek crisis, Goldman Sachs said in an e-mailed note dated July 6. The market has yet to rebalance amid increased supply from the Organization of Petroleum Exporting Countries, according to the bank.

OPEC’s output surged last month to the highest level since August 2012 as Iraq joined Saudi Arabia in raising output. The 12-member group, which supplies about 40 percent of the world’s oil, pumped 32.1 million barrels a day in June, data compiled by Bloomberg showed.

In the U.S., crude stockpiles probably shrank by 750,000 barrels in the week ended July 3, according to the median estimate in a Bloomberg survey of eight analysts before an Energy Information Administration report Wednesday. Supplies in the world’s largest oil consumer were previously at 465.4 million barrels.