Oil News: Iran Deal Pushes Prices Down

Oil News

Following the landmark nuclear deal that was agreed upon last week, sanctions will slowly be lifted from Iran. The historic deal allows for the gradual return of Iranian oil to the global market next year, which will only exacerbate the current global supply glut that has caused prices to crash over the last year. After the news, West Texas Intermediate (WTI) crude oil reached its lowest point in three months.

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WTI crude oil fell to $50.50 in trading on Friday, only about a dollar higher than the lowest price in the last six months. Oil prices have been under pressure as a supply glut caused by the shale oil produced in the US has vastly increased the supply of oil. The Organization of Petroleum Exporting Countries (OPEC) decided not to cut its output in November, leading oil prices to crash as demand could not meet the increased supply. The potential addition of another million barrels per day from Iran could cause prices to fall further.

Oil rig counts in the US had been recovering slowly before the Iran announcement, but the deal and a strong dollar caused oil prices to fall and rigs to shut down. The persistent global supply glut and decreased demand growth from China is expected to have a prolonged effect on oil prices, with Royal Dutch Shell expecting it to take five years for oil prices to recover to $90 a barrel. Shell does expect prices to recover to $67 a barrel in 2016 and $75 in 2017 as part of the slow recovery.

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