Oil driven lower as markets prepare for Iranian shipments
Iran could resume oil exports within months, adding to a glut of supply that has already halved wholesale oil prices in recent months.
A deal with world powers struck on Thursday has tajken the OPEC member a step closer to restoring oil production that was cut by sanctions, though it is not yet clear when it will happen.
The preliminary agreement outlined on Thursday signals the Persian Gulf nation may be able to resume exports within months of a final deal, which negotiators aim to conclude by June 30, analaysts at UBS Group and Commerzbank said.
Iran's shipments abroad have been curbed 50pc by measures imposed in mid-2012.
Crude oil prices were weaker yesterday, though with world markets largely shut the true impact will take time to filter through.
The return of Iran's oil to a global market oversupplied including by US shale output threatens the price recovery fellow producers are expecting later this year.
Under the accord, the US and European Union would lift the economic sanctions if inspectors from the International Atomic Energy Agency verify Iran's compliance with curbs on its nuclear programme. "In essence, there will be more Iranian oil soon," Giovanni Staunovo, an analyst at UBS, said.
"For the time being, the announcement is bearish. Sanctions will be lifted following the OK from the International Atomic Energy Agency (IAEA). For me, that's likely to come in the second half of the year," he said.
Brent has fallen by more than half from a 12-month high in June because of the global supply glut. Futures for May settlement extended losses on Thursday after the agreement was announced in Lausanne, Switzerland, and finished down $2.15 to $54.95 a barrel on the London-based ICE Futures Europe exchange.
West Texas Intermediate for May delivery declined 1.9pc to $49.14 a barrel.
Further price losses may be limited as there's no guarantee a full deal will be reached by the June deadline, BNP Paribas said.
Russia doesn't see any risks to prices from Iranian oil exports and is keeping a 2015 estimate for oil at $50 a barrel, Deputy Prime Minister Arkady Dvorkovich said yesterday. (Bloomberg)