Oil prices are poised to fall further as Iran deal looms

MarketWatch

It’s just a matter of time before sanctions on Iran are lifted. And when they are lifted, oil is likely to tumble further as the Persian Gulf country boosts production and battles swing-producer Saudi Arabia for market share.

Crude-oil for August delivery CLQ5, -1.85% has been walloped with a 12% fall so far in July on the New York Mercantile Exchange. Prices dipped below $51 a barrel on Tuesday, before paring much of their losses.

August Brent crude traded on the ICE Futures exchange LCOQ5, -0.60% has seen a month-to-date loss of 9.4% and finished at $56.85 a barrel on Tuesday.

But oil prices are poised to fall further as a nuclear deal between Iran and the U.S., China, France, Russia, the U.K. and Germany appears likely. Such a deal would unleash a new supply of crude oil back on to the market.

Assuming the sanctions are removed, Matt Parry, senior oil analyst at the International Energy Agency, said he expects Iran to “quickly return to the [Organization of the Petroleum Exporting Countries] fold—very much as Iraq has done, increasing supplies as they please in an effort to claw back market share.”

Talks between Iran and six world powers are expected to continue past Tuesday’s deadline, but an agreement that would lift sanctions on Iran is expected to be reached eventually.

“Iran will not care much about the recent falls in oil prices,” said Fawad Razaqzada, technical analyst at FOREX.com. “They will try to sell as much of the stuff as possible like all the other OPEC members—for if they don’t, they will lose out.”