Economic sanctions on Iran finally lifted, oil tumbles to below US$28 a barrel

oilbarrels SergioRusso flickrIran’s re-entry to the oil market has raised concerns as there is already an over-supply. (Image source: SergioRusso/Flickr)Economic sanctions on Iran have finally been lifted, even as the price of oil tumbled to below US$28 a barrel at the start of the week

A Reuters report has stated that the markets anticipated a rise in Iranian exports following the lifting of sanctions. In April 2015, the UN Security Council’s permanent members and Germany agreed to lift sanctions that had been imposed on Iran for several decades, provided it adhered to limits imposed on nuclear programmes.

OPEC member Iran immediately issued an order on Monday to increase oil production by 500,000 bpd, accordinf to the country’s deputy oil minister.

However, that hasn’t stopped the concerns about Iran’s return to an already oversupplied oil market, noted analysts. Brent crude went down to US$$27.67 a barrel on Monday – the lowest since 2003. The benchmark was down 29 cents at US$28.64, stated the Reuters report.

“You can’t say this was unexpected but the Iran news is an additional factor that's working against oil prices,” said TD Securities analyst Bart Melek.

Oil price could fall even more, if Chinese economic data released overnight, including GDP and retail sales data, points to more weakness in the economy, added Malek.

Meanwhile, Iran is expected to export an extra 500,000 bpd in the short term from storage, but there are doubts whether the state of Iran’s oil infrastructure will allow further boosts anytime soon. SEB Markets expect Iranian oil output to rise by 400,000 bpd to 3.2mn bpd in 2016, while Tehran has said it will add one million bpd to its existing output by the year-end.

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