Brent crude futures fell as much as $2.50, about 2%, to $108.63 as Monday commodities traders digested the interim deal reached this weekend to curb Iran's nuclear activities.
Analysts were predicting this kind of significant but not overwhelming market reaction. Western powers agreed they would begin lifting the ban on Iranian exports to their countries in six month's time. But Iran's oil sector has been hit hard by sanctions, and it may take some time for production to recover to pre-2010 levels. As Bloomberg reported:
"The agreement probably will have a 'somewhat muted' effect on oil prices, according to analysts including Mark Keenan, cross-commodity research strategist at Societe Generale in Singapore. 'We can, however, expect some price weakness as the market adjusts to the future prospect that Iranian exports will resume,' he said by e-mail."
But Reuters' Daniel Fineren reported there was some fine print in the deal making it easier for Asian countries to acquire insurance on importing Iranian crude, which would accelerate Persian barrels returning to markets. Plus, the White House may have inadvertently overstated how much Iran has been exporting:
"Kevin Book, Managing Director at ClearView Energy Partners in Washington, said the apparent easing on insurance could provide for an increase of 200,000 to 400,000 bpd in Iranian exports, particularly to Indian refiners.
He also noted that the White House's mention of a 1 million bpd limit was much higher than a recent estimate that Iran exported some 715,000 bpd in October, suggesting that the deal could mean a 285,000 bpd supply boost "relatively quickly."
So, we get this chart:
U.S. crude futures, meanwhile are down about 0.8%.