Iranian oil will push prices down for a prolonged period as sanctions on the country end as part of the nuclear deal reached Tuesday, energy experts said.

Iran could boost production from 2.9 million barrels to 4.2 million barrels per day by 2020, said Sara Vakhshouri, an energy analyst with SVB International. Iran also could immediately lower prices because it has stored about 37 million barrels of oil and condensate, a form of light oil, on offshore tankers that it can quickly release to the market.

The immediate price effects were mooted largely because markets had been expecting the sanctions to be lifted, said Sam Ori, executive director of the Energy Policy Institute at the University of Chicago. Brent and West Texas Intermediate prices fell with the news of the deal Tuesday morning but recovered to post gains as of 4 p.m., with the former hovering near $58 per barrel and the latter near $53 per barrel.

Member states of the Organization of the Petroleum Exporting Countries have been far out-producing their quotas. Ori noted the oil market demand for supplies from the cartel was 28.3 million barrels per day for the second quarter, but actual
OPEC output averaged 31.5 million barrels. Adding Iran back to the equation likely will extend the bout of low prices for at least another year, he said, with Brent prices remaining around $50 per barrel.

"I do think this is likely to contribute to an extended period of low prices at this point. The deal comes right on the heels of a fairly bearish [International Energy Agency] oil market report that shows the global oversupply hit unexpected highs in the second quarter, and suggests that the glut will not really unwind anytime in 2015 or 2016," Ori said in an email.

Prices cratered from above $110 per barrel in June 2014 to about $40 in January as OPEC, led by Saudi Arabia, decided against cutting production. Ostensibly, the move was aimed at regaining market share by bleeding U.S. producers in shale energy regions that rely on hydraulic fracturing, or fracking, techniques that are costlier than conventional oil wells.

Consumers have benefited to some degree. The U.S. Energy Information Administration said Tuesday that summer gasoline prices would hit their lowest average since 2009, at $2.67 per gallon. That's due to a fall in oil prices and a rise in both disposable income and employment.

But U.S. oil production is also expected to take a hit, according to the EIA, which will have reverberations across oil-producing regions. While production averaged 9.6 million barrels daily through the first half of the year, the EIA estimates output will fall to 9.2 million barrels per day by 2016. Rig counts have already fallen 60 percent compared with October 2014.

But the "break-even" point — at which drilling would no longer be profitable — has fallen as U.S. crude producers have become more efficient at fracking. Many analysts now believe U.S. drillers can compete at about $50 per barrel.

That reality and the possibility of adding to the global oversupply will test Saudi Arabia's strategy of trying to suffocate U.S. drilling, said Neil Bhatiya, a policy associate with the Century Foundation think tank. That's because it needs a high oil price to fill its coffers. Continuing to operate at current price levels would likely tap funds faster than they can be replenished.

"Long term it probably means this low price environment we've been in for the last year or so will be with us for longer. I think Iran's return to the OPEC fold will put pressure on Saudi Arabia's strategy to try to put U.S. producers out of business. Will be an interesting back and forth to watch," he said in an email.

But those low prices will deter investments in major projects, such as Arctic offshore drilling, deepwater projects and oil sands, that are more capital intensive and costly, Ori said. That means the stage is being set for a rise in oil prices toward the end of the decade, he said.

And just as those prices prepare to rise, demand is projected to tick upward after 2020 as emerging economies get wealthier and begin to consume more oil, said Frederick Lawrence, vice president of economics and international affairs with the Independent Petroleum Association of America. That's when U.S. producers might be called to kick back into high gear.

"Non-OPEC crude will be important in bridging this gap, and the U.S. has played a pivotal role in the growth of non-OPEC crude supply over the past decade," Lawrence said in an email.