Oil prices rebounded from earlier losses to end higher after it became clear to traders that the nuclear agreement between Iran and the world powers would not lead to an immediate lifting of economic sanctions on the Islamic country.
Light sweet crude for August delivery jumped 84 cents or 1.6% to end at $53.04 a barrel on the New York Mercantile exchange- its highest market close since June 12. The US most active contract had traded at a low of $50.38 immediately after the news on the agreement.
Brent for august delivery, the global benchmark, recovered from an intraday low of $56.43 a barrel to end 66 cents or 1% higher at $58.51 a barrel on the London based ICE Futures Exchange.
“I think people had already sold down the price of oil, expecting an agreement,” Michael Lynch, an analyst with the US-based consultancy Strategic Energy & Economic Research, told Yahoo News.
“So it’s a case of selling on the rumor and buying on the news.”
Under the pact, sanctions against the country by the United Nations, the European Union and the United states will only be lifted after Iran curtails its nuclear program.
Even after the sanctions are lifted, most analysts expect the world’s fourth largest exporter of crude to raise its oil shipments gradually.
Crude futures plummeted right after the news that Iran and the world powers had reached an agreement to curb its nuclear program. The pact is expected to limit the country’s nuclear plan to energy rather that nuclear weapons.
Iran reported that once sanctions lifted against it are lifted, it would double its current oil shipment levels in less than two months, an increase to about I million barrels per day.
“Oil from Iran will take time to return, and will not be before next year, most likely the second half of 2016,” Amrita Sen, chief oil analyst at London-based consultancy Energy Aspects, told Reuters.
To contact the reporter of the story: Samuel Rae at firstname.lastname@example.org