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15 Jan, 2016 12:32

Crude drops below $30 with Iran sanctions about to be lifted

Crude drops below $30 with Iran sanctions about to be lifted

The Brent and WTI crude benchmarks slid below $30 per barrel on Friday, as investors worry about Iran’s earlier than expected return to the oil market. International sanctions on Tehran may be lifted Monday, allowing the fifth-biggest member of OPEC to boost oil exports.

"This is three or four months ahead of what the market was thinking last year, so it just adds fuel to the fire," Mitsubishi Corp oil risk manager Tony Nunan told Reuters.

“Lower oil prices have been a sentiment leader for the recent market selloff and will again be in focus with Iranian sanctions expected to be lifted next week,” Ric Spooner, a chief analyst at CMC Markets, said in a note on Friday, quoted by Bloomberg.

“How fast Iran can put oil back on the market will now be a key issue for oil markets, with many skeptical that it will be able to do this nearly as fast as it has forecast,” he added.

Iranian and US officials have confirmed that the central vessel of Iran’s Arak heavy water reactor has been filled with concrete following the removal of its core, bringing Iran closer to meeting the requirements for having international sanctions lifted.

Iranian oil would add to the glut that has made prices collapse since the middle of 2014.

"It is the wrong time for Iran to be returning to the oil market, both for the market and (probably) also for Iran. It would have been so much more ideal for Iran to return to the oil scene if prices were soaring at $100," Phillip Futures said in a note, quoted by Reuters.

"In the very short term, another price drop cannot be excluded in particular after sanctions against Iran are being lifted," Commerzbank analyst Carsten Fritch told Reuters Global Oil Forum.

"That means a drop toward $25 is quite possible, but not much lower than that,” he said.

The bank previously predicted $63 per barrel Brent in 2016, but downgraded it to $50, which is still $20 per barrel higher than the current price.