Oil prices fall in reaction to Iran nuclear deal in Vienna

Crude oil prices fell on Tuesday in reaction to news that an agreement was reached between Iran and global powers in Vienna on a nuclear deal. This would allow an easing of sanctions against Iran and consequently an increase in the country’s oil exports. Flooding the market with oil would decrease prices in an already oversupplied market.

Crude prices tumbled more than $1 early on Tuesday to $50.89.

The six major global powers involved in the deal include Britain, China, France, Germany, Russia and the United States. The meeting at the United Nations center in Vienna resulted in a deal that will grant Tehran sanctions relief in exchange for curbs on its nuclear programme.

Sanctions have crippled Iran’s oil production, halving oil exports to a little over 1 million barrels per day and severely limiting new development projects. A deal ending sanctions could see Iran increase its oil exports by up to 60 percent within a year.

While it may take many months for Iran to fully ramp up its export capacity following any easing of sanctions, the oversupplied oil market due to Saudi output at record highs creates bearish sentiment for oil. Even a modest initial increase from Iran 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.

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