Brent falls as Iran reaches deal to halt nuclear enrichment
Brent and WTI prices fell in November as Iran reached a deal with the international community to halt its nuclear enrichment programme in return for a modest easing of economic sanctions
On 24 November, the US and five other nations reached a deal with Iran to curb its nuclear development in exchange for up to $7 billion in relief from economic sanctions over the next six months.
Brent oil prices fell by more than $2 per barrel (/b) on 25 November, to $108/b. WTI also fell by around $1/b on the day, to around $93/b.
As part of the deal, $4.2bn of Iran’s frozen oil assets will be released and it will be allowed to continue exporting oil at current levels of around 1m b/d.
Deutsch Bank said in a 2 December note it expects oil markets to be sensitive to the possibility of Iranian sanctions easing over the next six months. Brent and WTI were trading around $109/b and $92/b respectively on 2 December. “This will mark the first test for Opec members on making room for ramped-up Iranian oil exports,” the bank says.
In early November, Brent and WTI prices fell to four-month lows, of around $106/b and $94/b respectively, as crude markets remained well supplied. The International Energy Agency (IEA) said global refinery runs were at seasonal lows and OECD industry stocks remained high. OECD industry oil stocks increased in September, reversing the draw in August.
Stocks of refined products covered 30.8 days of forward demand at the end of September. Preliminary data point to an unusually shallow draw of 7.6m barrels in total oil inventories in October.
The IEA has increased its estimate for 2013 global oil demand because of stronger-than-expected European consumption in the third quarter. The agency expects global oil demand to increase by around 1m b/d this year, to 91m b/d.
The IEA said global oil demand will increase by around 1.1m b/d next year, to reach 92.1m b/d. This is around 30,000 b/d less than was previously predicted because of a more pessimistic economic outlook from the International Monetary Fund (IMF).
The IMF said on 12 November that it expects economic growth in the Middle East to fall by over 2% this year as the region’s exporters face disruptions to oil production and weak demand growth.