Brent Oil Briefly Falls Below US$28 After Iran Sanctions Lifted

Brent for March delivery tumbled to US$27.67 in Asia Monday after Iran sanctions were lifted ©Saul Loeb (AFP)

Brent crude briefly fell to fresh multi-year lows below US$28 a barrel in Asia on Monday on fears of a worsening supply glut after Western sanctions on Iran were lifted, allowing the country to resume oil exports.

AFP report continues:

Brent for March delivery tumbled to as low as US$27.67, or by 4.4 percent from Friday's close, before rebounding to trade at above US$28. The last time Brent closed below US$28 was in November 2003.

At around 0145 GMT, Brent was trading 43 cents, or 1.49 percent, lower at 28.51. US benchmark West Texas Intermediate for delivery in February was down 35 cents, or 1.19 percent, at US$29.07 a barrel.

"The drop was due to the Western sanctions on Iran being lifted. This means we will be seeing a bigger oil glut with Iranian crude exports coming back to the market," said Phillip Futures analyst Daniel Ang.

The United States and the European Union lifted the sanctions on Sunday after the UN's atomic watchdog confirmed that Iran had complied with its obligations under a landmark deal last year to curb Tehran's nuclear programme.

Ric Spooner, chief market analyst at CMC Markets in Sydney, said that while Iranian oil could come in quickly, suppliers still needed to find buyers.

"Iran has quite a large storage of oil at the moment. They are in a position to sell that if they choose to do so and increase supply quite quickly," Spooner told AFP by telephone.

But "they've got to get the buyers and that's one of the key questions", he said.

"I think Iran's main priority is going to be re-establishing its customer base and re-establishing its market share. They will want to be doing good, sound, attractive deals for their customers.

"How much of their above-ground supplies they use for what deals can be done is probably going to be the answer to how much goes back on the market in the short-term."

The international crude market is currently awash with supplies, boosted by high production levels from the OPEC cartel and US shale oil.

The Organization of the Petroleum Exporting Countries late last year rejected calls for the group to slash output and perk up prices, preferring to fight for market share with competitors.