Oil prices plunge after Iran announcement

Crude oil prices fell early Tuesday amid the announcement of a nuclear deal with Iran and six world powers.

Both the West Texas Intermediate (WTI) and Brent crude oil future benchmarks dropped as much as 2 percent in early trading, or more than a dollar per barrel.

{mosads}WTI, the main United States benchmark, went as low as $50.90 per barrel shortly before 7 a.m., and Brent, the international price, hit $56.76. Both recovered slightly after their drops.

The markets’ response to the deal had been widely expected by analysts as a response to a large volume of oil that could hit the world’s markets within years.

“Sanctions have crippled Iran’s oil production, halving oil exports and severely limiting new development projects,” Sarosh Zaiwalla, a London-based sanctions lawyer, told Reuters. “The prospect of them being lifted is creating great excitement … as foreign trade and investment will allow Iran to make huge efficiencies and drive down the cost of production.”

If Congress does not scuttle the agreement and Iran and other countries keep up with its terms, the Western export sanctions imposed against Iran by the U.S. and Europe will lift in the coming years.

That could bring hundreds of thousands of barrels of Iranian crude to market.

Iranian Oil Minister Bijan Namdar Zanganeh estimated that up to 500,000 additional barrels a day could come out of Iran once sanctions are lifted and another 500,000 within about six months afterward, according to Bloomberg News.

That’s in addition to the about 1.1 million barrels Iran currently exports daily, down from 2.5 million in 2012, before the sanctions.

Iran said in May that it brought leaders from major Western oil companies to Tehran to meet about potential oil deals that could happen if the sanctions are loosened.