Crude oil prices continued lower on Tuesday, albeit only lightly, as a breakthrough deal was reached between Iran and the West.
The agreement is expected to see international economic sanctions on Iran lifted, and potentially turns on the taps to a significant increase in crude oil exports from the Middle Eastern country.
In London trading Brent Crude was down about 0.6% at US$57.50, while West Texas Intermediary futures were changing hands just above US$52 per barrel.
As one might imagine, however, it is not as simple or immediate as that.
Thomas Pugh, commodities economist at Capital Economics, says it is unlikely that large volumes of Iranian crude will hit the market this year.
“Once sanctions have been lifted there could well be a surge in exports in the first few months as Iran sells its stores of oil, but ramping production up to previous levels is likely to take considerably longer,” Pugh said in a note.
The newly agreed deal, which is already more than a year in the making, could still be disrupted by hardliners in either America or the Middle East, the economist said. “In the short term at least, oil prices are more likely to be influenced by sentiment towards commodities in general and by developments in China in particular.”
Barack Obama has already warned the American congress that he is prepared to use a presidential veto should the Republican run house resist the potentially historic deal.
The American president says the world is safer as a result of the deal, which allows international inspectors to monitor enrichment of nuclear material, which Iran claims will be used for power generation.
"Without this deal, there is no scenario where the world joins us in sanctioning Iran until it completely dismantles its nuclear program," Obama said today.
Israeli prime minister Benjamin Netanyahu, meanwhile, criticised the deal and called it a “historic mistake”.
Netanyahu says Iran has won the “jackpot” and added that a “cash bonanza” from oil export sales will allow Iran to “pursue its aggression and terror in the region and in the world."
There has also already been criticism of the proposed arrangement in Washington, where politicians are presently jockeying for positon in the race for candidacy ahead of the next American presidential election.