Oil Prices Fall as 'Imminent' Iran Nuclear Deal Becomes Visible

On Monday, oil prices dropped significantly on reports that Iran and Western nations were close to an agreement that would ease sanctions on the country's petroleum exports.

West Texas Intermediate futures, the U.S. crude benchmark, fell more than 1% to $89.39 per barrel as of 20:01 ET, while London-traded Brent oil futures down 0.5% to $95.59 per barrel (0002 GMT).

Al Jazeera, a Qatari news outlet, reported over the weekend that a nuclear agreement with Iran was 'imminent,' while other sources indicated that Tehran was prepared to withdraw its demand that the Islamic Revolutionary Guard Corps be removed from the State Department's List of Foreign Terrorist Organizations.

Iran's desire for the corps was a major obstacle to the accord and had impeded EU-mediated negotiations with the United States to this point.

Al Jazeera said that the conclusion of an agreement will result in sanctions against 17 Iranian banks and 150 economic organizations being eased. In addition, Tehran will be authorized to export 50 million barrels of oil per day four months after the signing of the pact.

It is estimated that the decision will instantly release more than 1 million barrels of oil per day onto the market, which will have a negative effect on oil prices.

Nonetheless, this increase in supply may push the Organization of the Petroleum Exporting Countries to implement measures to restrict output. Oil prices surged late in the previous week due to speculation over supply restrictions, but they concluded the week in the red.

In recent weeks, oil prices dropped to six-month lows as speculators feared a demand deficit caused by a worldwide economic slowdown and recession. Indicators of economic stress in the world's largest oil importer, China, have been of particular concern to oil markets. This year, Beijing's zero-COVID plan has led to a succession of COVID lockdowns that have crippled the Chinese economy.

Nonetheless, statistics from the previous week's U.S. oil inventories indicated that demand in the world's largest economy was recovering from a downturn. Nonetheless, a further tightening of monetary conditions by the Federal Reserve could threaten this recovery.