Oil prices fall as Iran reaches nuclear deal
Agreement with six global powers will see sanctions ease and oil exports increase
Oil prices tumbled more than a US dollar yesterday as Iran and six global powers reached a nuclear deal that could see an easing of sanctions against Tehran and a gradual increase in its oil exports just as Asian economies showed further signs of weakness.
Front-month Brent crude futures dropped more than 2 per cent and more than US dollar to US$56.66 a barrel. US crude was trading down US$1.21 at US$50.99 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 yesterday.
Meanwhile, the outlook for some Asian economies dimmed further, potentially eroding oil demand.