The easing of a ban on European insurance for shipments ofIranian oil may lift Iran's crude exports to big oil buyers inAsia, including India and China.

The easing of EU shipping insurance sanctions was part of a dealon Sunday between Iran and six world powers to curb Tehran'snuclear programme in exchange for limited sanctions relief.

Oil buyers in Asia, Turkey and South Africa have reduced importsof Iranian oil to avoid the threat of U.S. sanctions, but also havehad imports curtailed by the ban on UK-dominated providers ofshipping insurance.

Iranian oil sales have fallen by more than half from 2011 levelsto about 1 million barrels a day as a result of EU and U.S.sanctions on oil trade, shipping insurance and banking.

“The relief in EU sanctions on oil shipping insurance is a bigdeal and creates the conditions to make it easier for Iranto get atleast up to the sanctioned levels,” Olivier Jakob from Petromatrixenergy consultancy said.

“A lifting of the insurance ban could free up some of Iran'sstrained tanker fleet for increasing use in domestic floating crudeoil storage,” Goldman Sachs said in a note.

India's refiners cut oil purchases further after Europeanreinsurers added a clause that could mean claims arising during theprocessing of Iranian oil would not be met.

Although Sunday's interim deal is not intended to allow anyincrease in Iranian oil exports, a “joint plan of action” documentposted on European Union and U.S. government websites says that inreturn for Iran meeting its commitments, the West would:

“Pause efforts to further reduce Iran's crude oil sales,enabling Iran's current customers to purchase their current averageamounts of crude oil. Enable the repatriation of an agreed amountof revenue held abroad. For such oil sales, suspend the EU and U.S.sanctions on associated insurance and transportationservices.”

It is not clear whether this also means that the problematicclauses in Indian refiners' insurance contracts will be removed,but alleviating insurance headaches for some shipments should helpsmooth a trade that has dipped below sanctioned levels thisyear.

Kevin Book, managing director at ClearView Energy Partners inWashington, said the easing on insurance could provide for anincrease of 200,000 to 400,000 barrels per day (bpd) in Iranianexports, particularly to Indian refiners.

A fact sheet posted on the U.S. State Department's website onSunday said that the nuclear deal would not allow any increase inIranian crude sales over the next six months.

“Under this first step, the EU crude oil ban will remain ineffect and Iran will be held to approximately 1 million bpd insales, resulting in continuing lost sales worth an additional $4billion per month, every month, going forward,” the fact sheetsaid.

Benchmark Brent crude dropped about $2 a barrel early on Mondayto around $109.

Analysts at Barclays bank said no more than 400,000 bpd ofIranian oil were likely to return to the market in the comingmonths, adding that Iran could struggle to drastically increase itsexports due to remaining sanctions and difficulties restartingshut-in production.

LONG TERM

Iran is home to some of the world's largest oil and gasreserves, but U.S. energy firms have been barred by Washington fromIran for nearly two decades.

Several European energy giants had planned multi-billion dollarinvestments over the last decade to help develop Iranian reserves,which could significantly improve global energy supplies over thelong term.

U.S. pressure drove European energy companies away from Iran inthe late 2000s, however, for fear of jeopardising their interestsin the U.S. market if they stayed.

Western bans on investment in or provision of technical servicesto Iran's energy sector remain firmly in place, and western energygiants who are keen to go into Iran as soon as sanctions are liftedwill have to wait.

Sanctions preventing the sale of refined petroleum products toIran, which needs to import such fuels because it lacks refiningcapacity, also remain in effect.

OIL MARKET

U.S. pressure on Iran's customers to find other suppliers hassupported global oil prices over the last two years.

Rising U.S. and Saudi production has helped dampen the impact onthe market.

U.S. lawmakers had been planning to make deeper cuts to Tehran'scrude exports, but Washington has put any further nuclear-relatedsanctions on hold.

“The various groups aligned against any deal give the marketgood cause for scepticism, but this deal is clearly a significantand bearish development,” Seth Kleinman, head of energy research atCitigroup, said.

The White House estimates that Iran has lost more than $80billion since the beginning of 2012 because of lost oil sales. Itestimates Tehran's earnings over the next six months will be down$30 billion by comparison with a six-month period of 2011, beforesanctions were imposed.

'LIMITED, TARGETED' RELIEF

The agreement suspends U.S. and EU sanctions on some othersectors of Iran's economy in the initial six-month period. Therelief, which the U.S. State Department said was “limited,temporary, targeted and reversible”, could allow Iran to collectabout $1.5 billion by resuming trade in gold and precious metal aswell as some trade for its auto and petrochemical sectors.

About $4.2 billion of oil sale revenue also can be transferredin instalments from accounts frozen in the West if Iran fulfils itscommitment, bringing the total relief allowed in the package toabout $7 billion, according to the State Department.

“The vast majority of Iran's approximately $100 billion inforeign exchange holdings are inaccessible or restricted bysanctions,” the State Department said on its website.

The pact also allows specified foreign banks to release Iranianoil revenue that has been frozen in its U.S. accounts to pay forfood, medicine, medical devices and other humanitarian purposes fordomestic use in Iran.

Sanctions were also lifted on Iran's auto industry, and the pacttemporarily permits spare airplane parts to be sent to help ensurethe safety of Iranian civil aviation.

Spokesmen for General Motors Co and Chrysler Group LLC declinedto immediately comment. A Ford Motor Co spokesman said it would“monitor the situation carefully as it may evolve over the nextmonths”, while following all legal requirements expected under thecurrent sanctions.

The U.S. government imposed sanctions on auto exports to Iranafter the 1979 revolution. But a small number of popular models areimported and sold in Iran by third-party distributors.