Oil futures tumbled sharply on Tuesday, after an Iranian diplomat confirmed that a historic nuclear agreement between Tehran and the West was reached in Vienna.
The deal, which could push millions of barrels of crude into the oversupplied world market, will be announced officially sometime in the late morning.
Iran and six world powers reached a long-awaited nuclear deal that would end sanctions on Tehran in exchange for curbs on the country's disputed nuclear program.
A deal is viewed as bearish for crude prices, as Iran reportedly hoards 30 million barrels of oil in its reserves ready for export.
An outflow of Iranian oil could depress crude prices in a global market already oversaturated by a glut of oversupply.
On the ICE Futures Exchange in London, for September delivery plunged $1.11, or 1.92%, to trade at $57.04 a barrel during European morning hours after hitting an intraday low of $56.96, the weakest level since July 8.
A day earlier, London-traded Brent prices lost 85 cents, or 1.44%, to close at $58.15 as concerns over a global supply glut weighed.
Elsewhere, on the New York Mercantile Exchange, for August delivery dropped $1.21, or 2.31%, to trade at $51.00 a barrel. On Monday, Nymex oil futures slumped 54 cents, or 1.02%, to end at $52.20.
The spread between the Brent and the WTI crude contracts stood at $6.04 a barrel, compared to $5.95 by close of trade on Monday.
Market players looked ahead to fresh weekly information on U.S. stockpiles of crude and refined products to gauge the strength of demand in the world’s largest oil consumer.
The American Petroleum Institute will release its inventories report later in the day, while Wednesday’s government report could show crude stockpiles fell by 2.1 million barrels in the week ended July 10.
New York-traded oil futures have been under heavy pressure in recent weeks as worries over high domestic U.S. oil production weighed.
According to industry research group Baker Hughes (NYSE:), the number of rigs drilling for oil in the U.S. rose by five last week to 645, marking the second straight week of gains after 29 weeks of declines.
Global oil production is outpacing demand following a boom in U.S. shale oil production and after a decision by the Organization of Petroleum Exporting Countries last year not to cut production.
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