Oil drops below $30 as Iran re-enters the market

Oil prices closed at their lowest point in 12 years on Friday as Iran prepared to re-enter the world market.

WTI crude prices dropped 5.7 per cent to close below $30 for the first time since 2003. Meanwhile, Brent declined 6.3 per cent to $28.94.

A historic nuclear deal between world powers and Iran officially came into effect on Saturday, resulting in the lifting of sanctions on the country.

US bank Goldman Sachs predicted a significant increase in Iran’s oil production this year and next year following the agreement.

Iran’s daily production was estimated at 3.133 million barrels per day in 2016 and 3.333 barrels per day in 2017. This compares to 2.847 million barrels per day in 2015.

Iran’s proven oil reserves accounted for 157.8 million barrels per day, according to BP’s statistics review.

The country said it intends to increase production by 500,000 barrels per day in the coming months, likely pushing global prices lower in the short term.

It is also estimated to have 22 Very Large Crude Carriers off the coast, with 13 fully or almost fully loaded, according to Thomson Reuters. Many of these could be heading to India, where Iran plans to increase exports by 200,000 barrels per day from the 260,000 shipped under sanctions restrictions.

On Friday, Iran’s Mehr news agency quoted officials as saying 200,000 to 220,000 barrels per day would be exported to France, Britain, Italy, Spain and Germany as soon as sanctions were lifted.

Before it was hit by sanctions, Iran exported 800,000 barrels per day to the continent.