Oil prices hit their lowest since 2003 on Monday, as the market braced for additional Iranian exports after the lifting of sanctions against the country over the weekend.
The United States and European Union on Saturday revoked sanctions that had cut Iran’s oil exports by about 2 million barrels per day (bpd) since their pre-sanctions 2011 peak to little more than 1 million bpd.
Iran, a member of the Organization of the Petroleum Exporting Countries (OPEC), said on Sunday that it is ready to increase exports by 500,000 bpd.
The drop was due to the Western sanctions on Iran being lifted. This means we will be seeing a bigger oil glut with Iranian crude exports coming back to the market
“The drop was due to the Western sanctions on Iran being lifted. This means we will be seeing a bigger oil glut with Iranian crude exports coming back to the market,” said Phillip Futures analyst Daniel Ang.
The decision to lift the sanctions against Iran came on Sunday after the international nuclear watchdog, the IAEA, said Iran had complied with a deal designed to prevent it developing nuclear weapons.
Iran has the fourth largest proven oil reserves in the world, according to the US Energy Information Agency and any additional oil would add to the one million barrels a day of over-supply that has led to a more than 70% collapse in oil prices since the middle of 2014.
Historically, OPEC has cut production to support prices. But led by Saudi Arabia, by far the group’s most powerful member, the group has resolutely refused to trim supply this time.
Analysts expect supply to continue to outstrip demand over the next two years, which would keep prices low.