On Tuesday prices of crude oil fell steeply after Iran and six world powers struck a nuclear deal allowing it to pour more oil into already oversupplied market.
August West Texas Intermediate crude lost $1.03, or 2%, to $51.17 a barrel, setting it on track for the lowest settlement price since mid-April. Brent crude for the same month slid 98 cents, or 1.7%, to $56.87 a barrel.
The losses came after Iran, the U.S., Russia, China, Britain, France and Germany came to agreement on Iran's nuclear accord, after days of tense negotiations. The deal should block Iran’s path to nuclear weapons. In return, the economic sanctions that have burdened Iran’s economy will be lifted, enabling the country to expand its energy exports and increase oil flows.
A number of analysts, including Naeem Aslam, chief market analyst at AvaTrade, consider that it will take a certain amount of time for Iran to become totally equipped to be able to produce oil at its optimum level.
Iran, however, does not have a large amount of oil in its reserve, which is ready to flood the market.
“This is like a plane on the runway ready to take off. Therefore, it will only add to the oil glut on the market and increase selling pressure,” Aslam said.
On Monday oil futures were also lower as Iran deal was expected and as the Organization of the Petroleum Exporting Countries reported its production was higher. Strong dollar also weighed on oil.
