Brent oil fell nearly 4 percent on Thursday after a preliminary pact between Iran and global powers on Tehran's nuclear program, even as officials set further talks in June and analysts questioned when the OPEC member will be allowed to export more crude.
North Sea Brent crude futures, the more widely-used global benchmark for oil, settled down $2.15, or 3.8 percent, at $54.95 a barrel, almost $1 above the session low.
US crude futures settled down 95 cents, or 2 percent, at $49.14 a barrel, after falling nearly $2 earlier. "I think the market over reacted and is now sitting back a little to think there is a lot more work to be done," said Dominick Chirichella, senior partner at the Energy Management Institute in New York.
Traders had been fixated on the marathon talks held in Lausanne, Switzerland for over a week as Iran clinched a preliminary agreement with the world powers on its nuclear program and the lifting of US-led sanctions that have halved its oil exports. The sanctions against Iran will come off under a "future comprehensive deal" to be agreed by June 30, after it complies with nuclear-related provisions, Iranian Foreign Minister Javad Zarif said in a statement.
Sanctions have cut Iran's oil exports to about 1.1 million barrels per day from 2.5 million bpd in 2012. The OPEC member is keeping about 30 million barrels of crude on a fleet of tankers ready to be shipped when allowed, into a market already flooded with supply.
John Kilduff, partner at New York energy hedge fund Again Capital, said since Iran was certain to export more oil at some point, it was time other members of OPEC considered cutting their production.
The selloff in oil, which began in June 2014, accelerated in November after the Saudis convinced the broader group within OPEC to stick to its output and defend market share. Brent crashed from 2014 peaks above $115 and US crude tumbled from above $107.
"Come June, the market will again be rocked by expectations of higher Iranian supply. If the Saudis stifle another production cut, that could be the final nail in OPEC's coffin as some of its members break away to do their own thing to support the market," Dominick Chirichella, senior partner at the Energy Management Institute in New York said.
