The price of oil tumbled today to new 12 year lows as traders engaged in a panic sell-off, fearful that the re-entry of Iran to the international market would lead to a further fall in prices in an already grossly oversupplied market.
US WTI crude was trading down 1.5% in the early Asian session, hovering around $28.99 per barrel. These prices have not been seen since 2003.
International sanctions which have locked Iran out of the international markets were lifted this weekend, as ties between them and the US warmed significantly after a historic prisoner swap.
Analysts estimate that Iran will add another half a million barrels per day to the markets. This is based on comments made by the Iranian deputy oil minister and an analysis of Iran’s ability to supply based on current infrastructure. Investors have long predicted Iran’s return to the oil markets but anticipate that it will develop slowly.
Iran is a member of OPEC, some members of which recently called for an emergency meeting to talk about collapsing prices. Despite this, Saudi Arabia, the largest member of OPEC, has shown no intentions of cutting back as it battles for market share.
With Saudi rival Iran re-entering the picture, expect this fight to supply the market to continue, further depressing oil prices in the near-term.