Oil futures fell Monday, with the European benchmark Brent crude dropping more than 1%.
The markets reacted after U.S. and other western countries agreed to a six-month deal with Iran on its nuclear program. The deal could eventually lead to lifting of sanctions on Iran and its sale of crude into the global market.
Crude oil for January delivery fell 90 cents, or 1%, to $93.94 a barrel on the New York Mercantile Exchange.
January Brent crude dropped $1.69, or 1.5%, to $109.36 a barrel.
The agreement announced Saturday between Iran and the U.S., Germany, China, France, Russia, and the United Kingdom will last six months and requires Iran to stop trying to improve its uranium-enrichment capacity and allow more monitoring of its nuclear program.
The U.S. State Department said the accord would “allow purchases of Iranian oil to remain at their currently significantly reduced levels — levels that are 60% less than two years ago. $4.2 billion from these sales will be allowed to be transferred in installments if, and as, Iran fulfills its commitments,” according to Market Watch.
But the most important part of the deal is that it lifts the European Union insurance ban on Iranian tankers, “which will reduce the cost of Iranian oil to their current customers like India and China,” said Phil Flynn, senior market analyst at Price Futures Group. “That should increase Iranian oil shipments even though there is no overall lifting of all Iran oil sanctions,” the report said.
The White House said Saturday the deal gives Iran “limited, temporary, targeted, and reversible relief . . . structured so that the overwhelming majority of the sanctions regime, including the key oil, banking, and financial sanctions architecture, remains in place.”
“If Iran fails to meet its commitments,” the Obama administration said, “we will revoke the limited relief and impose additional sanctions on Iran.”
Iran was exporting about 2 million barrels per day before U.S. and international sanctions were imposed.
December natural gas (NMN:NGZ13) on Nymex, however, rallied nearly 3 cents, for a gain of 0.7%, to $3.80 per million British thermal units.