Oil prices have fallen below $28 per barrel after the US and European Union lifted economic sanctions against Iran, which threatens to add to the global oversupply with Iranian export resuming.

The benchmark fell 29 cents at $28.64, while US crude CLc1 declined 48 cents at $28.94 a barrel, Reuters reported.

The decision to lift sanctions came after nuclear watchdog International Atomic Energy Agency (IAEA) said Iran had complied with an agreement designed to prevent it developing nuclear weapons.

A member of the Organization of the Petroleum Exporting Countries (OPEC), Iran is expected to pump huge oil barrels into an already oversupplied oil market, making the commodity cheaper.

Iran’s Deputy Oil Minister Roknoddin Javadi said that the country will increase production by 500,000bpd.

SEB Markets expect an increase in Iranian oil output by 400,000bpd to 3.2 million bpd in 2016.

Iran is prepared to enter the market with at least a dozen very large crude carrier super-tankers that are already filled and in place for sale.

In its latest monthly report, OPEC said that demand for the group’s oil will increase to an average 31.65 million bpd in 2016, from 29.90 million bpd in 2015, Platts reported.

OPEC Secretariat calculations revealed that the price of OPEC basket of 13 crudes stood at $23.58 a barrel on Monday, compared with $24.74 the previous Friday.

Image: The US crude CLc1 dropped 48 cents at $28.94 a barrel. Photo: courtesy of Victor Habbick/ FreeDigitalPhotos.net.