Crude prices dropped 4 percent Thursday on news of a framework nuclear agreement between Iran and the international community that will lift economic and oil sanctions against the OPEC member.
The sanction ending deal has stoked concerns that Iranian oil will flood already swollen global crude inventories.
According to OPEC Iran currently produces about 3.5 million barrels of crude per day.
Western sanctions against Iran have restricted crude exports to 1 million barrels a day from a high of 2.5 million barrels per day since 2012.
“The Iran nuclear deal is a massive blow for the oil price and we could see the crude-oil price falling to $30 very easily. This deal actually represents 1 million barrels a day of extra oil on the market so net effect on the supply equation will be nearly 2 million [barrels a day],” AvaTrade chief market analyst Naeem Aslam told Marketwatch.
Brent crude fell nearly four points Friday morning to $54.95 per barrel while WTI crude fell almost 2 percent to $49.14 per barrel.
Earlier this month U.S crude stores hit 448.9 billion barrels excluding the Strategic Petroleum Reserve, an 80 year high, thanks in part to the nearly 1 million extra barrels per day the U.S. has been adding to stores through production and importing.
Iran will allow inspectors from the International Atomic Energy Agency into the country to monitor and inspect nuclear facilities.
The country will also drastically cut its number of installed centrifuges, limit its stockpile of enriched material and will not build any new enrichment facilities for 15 years.
U.S. sanctions against Iran for terrorism, human rights abuses and ballistic missiles will remain in place under the deal, the State Department said.
Iranian deputy foreign minister Abbas Araqch said oil sanctions were a key sticking point in the negotiations.
“We insist that the lifting of financial, bank and oil industry sanctions was the first step and on a clear roadmap for lifting the rest of the sanction,” Araqch told the Russian Times on Wednesday .
A final agreement is expected by June 30.