Iran and six world powers agreed on a landmark comprehensive deal over Tehran’s nuclear programme that would translate to a gradual removal of crippling sanctions imposed on the Middle Eastern country.
Details of the deal reached on Tuesday – including the scope of sanctions relief for Iran and the range of access international nuclear inspectors will be granted over the country’s nuclear sites are expected to be announced later in the day.

Oil prices fell by more than 2% as news of the deal broke as oversupply concerns heightened with Iran’s expected re-entry into the market as a major exporter.

Iran is part of the 12-member oil cartel OPEC.

“Crude prices are set for more volatility with Iran back,” according to a Dubai-based petrochemical trader.

At 08:18 GMT, August Brent crude on London’s ICE futures exchange was trading at $56.86/bbl, down by $0.99/bbl from the previous close. Earlier, the North Sea benchmark fell to a session low of $56.61/bbl, down by $1.24/bbl.

August NYMEX light sweet crude futures (WTI) were trading at $51.24/bbl, down by $0.96/bbl from the previous close. Earlier, the US benchmark fell to a low of $50.41/bbl, down $1.79/bbl.

Apart from increased crude supply, the global market may find itself flooded with key petrochemical products such as polyethylene (PE) and methanol when Iran re-enters the market, according to industry sources in the Middle East.

“Saudi Arabia will be worried about an Iranian re-entry. Iran can now compete freely in Europe,” according to a source close to an Iranian supplier.

When the sanctions are lifted, Iran will look to increase its crude and petrochemical output.

“Iranians had been waiting for this for a long time. The government will look to boost its energy output almost immediately,” said a Middle East-based petrochemical industry source.

Iran aims to bump up total petrochemical production capacity to 100m tonnes/year by end-2015, from 60m tonnes/year in 2012, data from state-owned National Petrochemical Company (NPC) showed.

The sanctions, which were imposed on suspicion that Iran is developing a nuclear weapon, prevented the country from selling its petrochemical and crude output to Europe.

In end-2011, the US introduced sanctions against Iran’s financial sector, while in July 2012, the EU froze the assets of Iran’s central bank and banned trades of Iranian products.

The six world powers – the US, UK, France, China, Russia and Germany – also known as P5+1, want Iran to scale back its nuclear activities to prevent it from building a nuclear weapon.

Iran has maintained that its uranium enrichment activities are strictly for energy generation.
Source: ICIS