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Oil Prices Fall After Iran Agreement

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Crude oil futures prices dropped on the New York and London markets during Nov. 25 trading on news of a 6-month agreement about Iran’s nuclear program, but oil prices recovered somewhat by closing as market participants’ fears eased about any immediate surge in world oil supply. The pact, reached Nov. 24 between Tehran and six world powers, sent crude futures prices tumbling in early trading on Nov. 25 on worries that Iran could resume its 1.5 million b/d exports. The world oil market is already robust given rising US production.

 

Iran vowed to freeze its nuclear program in exchange for easing some economic sanctions, but the main ban on oil exports to US and other major consumers still is in effect. Oil futures prices rose as analysts and traders learned more details of the Iran agreement. A series of talks and future agreements eventually could ease the embargo on Iran’s oil exports.

Analysts with Capital Economics, a London research firm, said the pact with Iran “bodes well for a much more comprehensive agreement to be struck next year. We expect this to contribute to a fall in oil prices to $90/bbl by the end of 2014, and further to $70/bbl by the end of 2020.”

The agreement reached on Nov. 24 relaxed some rules, making it easier to insure oil shipments from Iran. Consequently, Brent prices briefly dipped $3 to $108.05/bbl during Nov. 25 trading but then rallied to settle at $111/bbl.