Oil prices fell strongly on Tuesday as Iran reached a nuclear deal with six global powers that may precipitate an easing of sanctions against Tehran and a gradual increase in its oil exports just as Asian economies showed further signs of weakness.
The deal is expected to grant Tehran sanctions relief in exchange for curbs on its nuclear programme.
Front-month Brent crude futures dropped about 1.6 percentage points, or 89 cents, to $56.96 a barrel at 6.24am. US crude was trading down $1.08 at $51.12 per barrel.
“Sanctions have crippled Iran’s oil production, halving oil exports and severely limiting new development projects. The prospect of them being lifted is creating great excitement ... as foreign trade and investment will allow Iran to make huge efficiencies and drive down the cost of production,” said Sarosh Zaiwalla, a London-based sanctions lawyer.
Yet analysts say it would take Iran many months to fully ramp up its export capacity following any easing of sanctions. But even a modest initial increase would be enough to pull international oil prices down further as the market is already producing around 2.5 million barrels per day above demand.
“The Iranian deal is unlikely to bring back large volumes of oil yet, given the removal of upstream sanctions is complex and significant investment is needed for raising output,” Energy Aspects said on Tuesday.
- Reuters
