The oil prices are likely to drop when futures trading on Sunday evening, says Yale Fishman, as the nuclear agreement between Iran and the six world powers made it more likely. Iran holds the world’s fourth-largest oil reserves but its exports have been hurt by some really tough sanctions.
How the Iran nuclear deal affects oil prices
Furthermore, Iran will not be allowed to increase its oil sales in a period of six months, the agreement has eased the Mid-East tensions. Brent crude, which is a benchmark for international oils, fell down to $108.52 on the ICE futures exchange in London. In addition, the U.S. crude benchmark fell to $93.64 on the New York Exchange.
Iran got limited relief with several sanctions, but this embargo on its oil exports remains in place while negotiations continue.
“A lot of sanctions have been eased, therefore this should allow Iran to slowly re-enter the global economy,” said Jonathan Barratt, chief economist at Barratt’s Bulletin for BBC. “As it comes to the oil, they only need to wait six months. If they satisfy all of the necessary requirements during that time they will be back in that sector.”
Analysis of the current oil market
On the other hand, the world powers have certain doubts in regard to Iran’s nuclear program. Actually, they are convinced that this program is secretly aimed at developing a nuclear bomb, but Iran the other hand denies this allegation. In an attempt to force Tehran to hold back, the US and other world-leading economies have imposed a series of sanctions on Iranian oil exports.
In November 2011, Washington threatened to cut off from the US financial system foreign financial institutions that cooperated with Iran’s central bank. Therefore, this decision forced several countries including China, Japan, India, and South Korea, which are the biggest Iranian clients, to cut their imports.
Potential impacts on the global economy
In addition, the European Union also imposed an embargo on importing Iranian oil.
“Working with our international partners, we have cut Iran’s oil sales down from 2.5 million barrels per day to 1 million bpd today,” as some sources from the White House said.
Some analysts claim that Iranian oil sales will eventually intensify with this deal. One of them is Ben le Brun, a market analyst at OptionsXpress in Sydney, he claims that “This news is hot off the press, and, so there are some spontaneous reactions.” But the market will probably want to see the most important aspects or practical details of this agreement before they see any significant declines in prices, proceeds Yale Fishman Associates according to the latest analysis.
Posted by Yale M Fishman.