Oil prices fell on Monday as officials from Iran and six world powers discussed a possible deal over Tehran's nuclear program that could bring an end to sanctions and allow an increase in Iranian oil exports.

The two sides have until the end of Tuesday to come up with an agreement at talks in Lausanne, Switzerland.

Officials close to the talks have said progress has been made and many investors believe a deal is in the making. Few expect the talks to end without some sort of agreement.

"Regarding Iran, there are two possible outcomes: a framework deal or an extended deadline," Bjarne Schieldrop, chief commodities analyst at SEB Markets in Oslo, told the Reuters Global Oil Forum.

Brent crude LCOc1 was down 47 cents at $55.94 a barrel by 0800 GMT as the market began to price in a deal with Iran. U.S. crude CLc1 was down 80 cents at $48.07.

Oil markets are well supplied and recent data has shown global production outstripping demand by around 1.5 million barrels per day (bpd), filling oil inventories.

Barclays said a build in U.S. stocks would make its way into an oversupplied global market in the second quarter and that demand would unlikely be strong enough to support oil prices once that happened.

"Continued dollar strength is (also) a headwind to the oil price recovery," Barclays said, forecasting the dollar would rise above parity with the euro by the fourth quarter of 2015.

Few investors expect the Organization of the Petroleum Exporting Countries, which pumps around a third of the world's oil, to restrain production to help push up prices.

Oil producers are much more focused on maintaining market share, analysts say.

"Saudi Arabia had to cut its price in Asia to ensure its crude oil remained attractive," analysts at energy consultancy Wood Mackenzie said.

Morgan Stanley analysts said demand for crude oil would also be dented by lower demand from the refinery sector, where production tends to fall towards the middle of the year.

Lower oil prices have encouraged some oil and gas companies to stop drilling, particularly in the United States, but this is unlikely to affect oil production until later this year.

"The current rig count is pointing to U.S. production declining slightly sequentially in 2Q15 and 3Q15," Goldman Sachs said, adding that activity could bounce back in 2016 as drillers benefit from falling production costs.