Oil prices fall after Iran agrees nuclear deal

Negotiators in Geneva (24/11/13) The deal has helped ease tensions in the Middle East region

Related Stories

Oil prices have fallen after Iran agreed a deal to curb some of its nuclear activities in return for an easing of international sanctions.

Iran holds the world's fourth-largest oil reserves, but its exports have been hurt by the tough sanctions against it.

Though Iran will not be allowed to increase its oil sales for six months, the deal has eased tensions in the Middle East - a key oil-producing area.

Brent crude was recently down 64 cents at $110.41 a barrel.

It had fallen to as low as $108.05 earlier in the trading session. Meanwhile, US light sweet crude was down $1.01 to $93.83, having fallen as low as $93.08.

Analysis

Iran could be a very big player in the global energy business. But sanctions have made it very difficult to invest in expanding and modernising the sector.

Oil production has never returned to the peak it reached in 1974. Output collapsed in the aftermath of the Islamic revolution at the end of that decade. It has partly recovered but remains less than half that earlier high.

In the gas industry, Iran has the world's largest proven reserves (according to BP's estimates), yet in some years it imports more than it exports. It uses gas for electricity and winter heating.

If the Geneva deal turns out to be the prelude to a wider and lasting agreement, Iran could become an even more important factor in world energy.

Fuel-intensive companies, such as airlines and travel firms, received a boost on the stock markets as a result.

International Airlines Group, the owner of British Airways and Iberia, was up 2.87% in lunchtime trading, while Air France KLM rose 3.11%. Travel operator Thomas Cook lifted 3.68%.

"There are a lot of sanctions that have been eased, which will allow Iran to slowly re-enter the global economy," Jonathan Barratt, chief economist at Barratt's Bulletin told the BBC.

"And as for oil - it's a just a six-month waiting period. If they tick all the boxes during that time, they will be back in that sector as well."

Knee-jerk reaction?

World powers suspect Iran's nuclear programme is secretly aimed at developing a nuclear bomb - a charge Iran has consistently denied.

In an attempt to force Tehran to curb its programme, the US and other leading economies have imposed a series of tough sanctions aimed at Iran's oil exports - a key driver of its economy.

In November 2011, Washington threatened to shun foreign financial institutions that conducted oil transactions with Iran's central bank.

That prompted several countries including China, Japan, India and South Korea - some of the biggest buyers of Iranian oil - to cut their imports.

The European Union also imposed a ban on imports of Iranian oil.

"Working with our international partners, we have cut Iran's oil sales from 2.5 million barrels per day (bpd) in early 2012 to 1 million bpd today," a fact sheet published by the White House said.

While the deal has raised hopes of a long-term agreement that may allow Iran to increase its oil sales eventually, some analysts believe oil prices are unlikely to fall further.

"This news is hot off the press, and so there is some knee-jerk reaction," said Ben le Brun, a market analyst at OptionsXpress in Sydney.

"The market will probably want to see the nitty-gritty details of the agreement before we see any further significant declines in prices," he added.

Iran oil exports

More on This Story

Related Stories

More Business stories

RSS

BBC Business Live

  1.  
    MARKETS 09:20: BBC Radio 4

    An interesting nugget from BlackRock's investment boss Ewen Cameron Watt. He told Today the markets' current complacency will melt in the face of higher interest rates that everyone expects are on their way. He gives some striking figures: "A 1% rise in [UK] mortgage rates will add £800-900 to the average mortgage bill." And put a serious crimp in spending power.

     
  2.  
    MARKETS UPDATE 09:05:

    Europe's share markets have all opened modestly higher. The best gainer in the UK is Weir Group, which is up 3%. And the pound has fallen 0.25% against both the dollar and the euro. It is at $1.6568 and 1.2621 euros.

    • The FTSE 100 is up 20 at 6845
    • the Dax in Frankfurt is 68 higher at 9547
    • Paris's Cac 40 is 13 points higher at 4393
     
  3.  
    SWISS ECONOMY 08:50:
    Big cheese

    No growth in Switzerland, reports the State Secretariat for Economics. A surprise: GDP was forecast to growth by about half a percent in the second quarter. Weaker exports and falling construction spending were the culprits. Yearly GDP growth was 0.6% - way under hopes of 1.7% growth. We will endeavour to find an even more fatuous picture before we pack up for the day. Might be hard.

     
  4.  
    CHINA PROPERTY 08:34: Via Blog Linda Yueh Chief business correspondent

    The various steps that China is taking to stem house price rises seems to be working, but can the government manage an orderly slowdown in the property sector? Linda Yueh finds out here.

     
  5.  
    BORIS ISLAND 08:19: Radio 5 live
    boris island

    Aviation expert David Bentley told Wake up to Money about one of the three remaining airport expansion options - that to expand Heathrow as a "hub", he says. A hub can mean base for airlines, or a major airport to change plane, as in a "hub and spoke system," he says. Whatever is decided, it will need to satisfy air travellers for the next 20 years or so, he adds.

     
  6.  
    AUSTRALIA BANK RATE 08:03:

    Australia's central bank kept its interest rate at a record low of 2.5% for a 12th consecutive policy meeting. The economy is growing sluggishly, initial data suggest.

     
  7.  
    BORIS ISLAND Adam Parsons Business Correspondent

    tweets: Davies says Boris Island project would be "reckless" and unlikely to appeal to government "of any political colour"

     
  8.  
    REDROW RESULTS 07:35:
    Redrow houses

    Redrow says a large number of its Help to Buy clients were first time buyers and over half were in the north of England. It says its order book is looking plump - up 85% on last year. Business Live has been debating Redrow's building style. Ease of upkeep of the wooden bits has excited debate.

     
  9.  
    REDROW RESULTS 07:21:

    Housebuilder Redrow's results are here. The usual tale of rising prices and the government's Help to Buy scheme. Redrow reports a 13% increase in the average selling price to £239,500, record group revenues and record pre-tax profits (almost doubling). Help To Buy provided 35% of private completions.

     
  10.  
    HEADLINES
  11.  
    BORIS ISLAND 07:07:

    Sir Howard Davis, chairman of the commission, said it had come down against Boris's island airport plan because: "The economic disruption would be huge and there are environmental hurdles which it may prove impossible, or very time-consuming to surmount." Even the least-ambitious version of the scheme would cost £70-90bn."

     
  12.  
    BORIS ISLAND 07:04:

    "The Airports Commission has today (2 September 2014) announced its decision not to add the inner Thames estuary airport proposal to its shortlist of options for providing new airport capacity by 2030. Following detailed further study into the feasibility of an inner Thames estuary airport the commission has concluded that the proposal has substantial disadvantages that collectively outweigh its potential benefits." A firm no, as expected.

     
  13.  
    MARKETS 06:56: BBC Radio 4

    BlackRock is the world's largest asset manager with more than $4.5 trillion under management. Its investment boss Ewen Cameron Watt, discussing why markets are so steady in the face of so much global tension tells Today: "Volatility is exceptionally low by historical standards and there's too much money chasing too few assets."

     
  14.  
    HSBC SHARES 06:42: Radio 5 live
    hsbc

    Ewen Cameron Watt, Chief Investment Strategist of the BlackRock Investment Institute, is now on 5 live talking about the news Neil Woodford, the fund manager, flogged his HSBC shares. "Neil bought HSBC because it was one of the few banks where he thought there was some dividend growth," he says. However, fines in the sector are likely to drain that prospect, he says. It's fines "more than anything that's sapping bank's willingness too lend, or ability to lend".

     
  15.  
    MARKETS 06:27: BBC Radio 4

    Today is looking at why stock markets are at a 52-week high when the political situation around the world is so dire - there's the threat of war in Europe and conflict in the key oil producer Iraq. Ewen Cameron Watt, chief investment strategist at Investment Institute of giant asset manager BlackRock says: "At this stage in the summer months the thought that Russia might affect sending gas to Europe is not a worry. [Energy stocks] are about 90% of capacity."

     
  16.  
    BANKING COMPLAINTS 06:12: Radio 5 live

    More from the Financial Ombudsman's Caroline Wayman. Fee-paying bank accounts are the cause of the increase in complaints about banking, she says. "People are getting in touch saying they didn't know they had a fee paying account or want one." People are "more aware but we see a lot of people who are reluctant to raise concerns," when coming forward to the service, she says. There are also more complaints about payday loans, but from a low starting point she says.

     
  17.  
    BANKING COMPLAINTS 06:02: Radio 5 live

    Caroline Wayman, chief executive of the Financial Ombudsman Service is on Wake Up to Money talking about complaints about banks. Complaints about payment protection insurance have fallen by almost a third, but complaints about other things in banking are up: "Still a lot of people get in touch, more than 1,000 people a day," she says. "We've had to expand a lot."

     
  18.  
    06:01: Howard Mustoe Business reporter

    Morning! Get in touch via email bizlivepage@bbc.co.uk or via twitter @BBCBusiness

     
  19.  
    06:00: Rebecca Marston Business reporter, BBC News

    Good morning and welcome to Tuesday's Business Live. Stick with us for the pick of the morning's news.

     

Features

  • Arsene Wenger, Diego Costa, Danny Welbeck Ins and outs

    Who will be satisfied and who left with regrets after transfer window? BBC Sport


  • Women doing ice bucket challengeChill factor

    How much has the Ice Bucket Challenge achieved?


  • Women in front of Windows XP posterUpgrade angst

    Readers share their experiences of replacing their operating system


  • Members of staff at James Stevenson Flags hold a Union Jack and Saltire flag UK minus Scotland

    Does the rest of the UK care if the Scots become independent?


BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.