Oil prices plunged more than 4 percent Thursday after the U.S. and other world powers announced a preliminary agreement to ensure that Iran's nuclear program remains peaceful. The proposal sets a final deadline of June 30 for the talks. The deal, which would remove Western sanctions against Tehran, ignited fear that new Iranian oil exports would add to a global market already facing oversupply.
Crude briefly tumbled as much as 5 percent following the deal's announcement. Brent crude, the benchmark for global oil prices, dropped 4.3 percent to $55.10 a barrel, for May 15 delivery, on the London ICE Futures Exchange. West Texas Intermediate crude, the benchmark for U.S. oil prices, lost 2.6 percent Wednesday to $48.77 a barrel, for May 15 delivery, on the New York Mercantile Exchange.
Oil prices have traded mostly lower this week as Iran and six major world powers negotiated for more than a week in Lausanne, Switzerland, over Iran's nuclear program.
Data this week showed U.S. crude stockpiles rose to a record high for a 12th consecutive week, as oil inventories rose by 4.8 million barrels for the week ended March 20, the U.S. Energy Information Administration said Wednesday. At 471.4 million barrels, U.S. crude oil inventories are at the highest level for this time of year in at least the last 80 years.
Oil prices lost more than half of their value from June to January, dropping around 60 percent. Although crude prices briefly stabilized in February, U.S. crude was weighed down as negotiations advanced toward a possible U.S. nuclear deal with Tehran.
The price of Brent fell sharply in March, dropping as low as $52.50 a barrel after climbing as high as $63 a barrel in February, according to data from Thomson Reuters. The main reasons for the decline: the potential for a nuclear deal with Iran against a backdrop of continued increases in production from the Organization of the Petroleum Exporting Countries, and a partial resumption of exports from Iraq, Julian Jessop, head of commodities research at Capital Economics, said in a research note Thursday.
These factors have trumped concerns that the crisis in Yemen might disrupt the flow of oil through the Bab el-Mandeb strait, one of the world’s main transit points for seaborne trade, Jessop said.
Airstrikes from Saudi Arabia and its Persian Gulf allies last week in Yemen had raised concerns about the security of Middle East oil shipments.