Oil prices decreased sharply today, after a nuclear deal signed on Sunday by Iran and six world powers led to fears among traders that oil demands would drop with extra supplies coming from Iran into an oversupplied market.
Brent crude dropped by $2.89 to $108.16 a barrel, while US crude was down by $1.37 to settle at $93.47 a barrel, reported Reuters.
The nuclear deal will allow Iran to export oil of around one million barrels per day (mmbpd) from 2.5 mmbpd for the next six months.
The US sanctions effectively bar Iran from repatriating earnings from oil exports, forcing customers to pay into a bank in their country.
Under the terms of the deal, Iran will be allowed access to $4.2bn of oil export revenues. But nearly $15bn will still flow into accounts overseas in the next six months.
Western pressure on Iran’s mainly Asian oil customers to find other suppliers has supported global oil prices for the last two years, but increasing US and Saudi production has helped dampen the impact of around 1.5mmbpd of Iranian oil being shut out.
The White House estimates that Iran has lost more than $80bn since the beginning of 2012 because of lost oil sales.
It also estimates Tehran’s earnings in the next six months will be $30bn down compared with a six-month period of 2011, before sanctions were imposed.
Investor focus in Asia will be on Japanese markets, as yen weakens, which pledges to boost exports and profits.
The dollar was up at 101.27 yen and remained under pressure as investors used it for carry trades – borrowing the currency at super-low rates to invest in higher-yielding assets elsewhere.
Image: Brent value drops more than $2.40 a barrel with Iran’s nuclear deal groundbreaking. Photo courtesy of freedigitalphotos.net.