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Crude prices slumps after US/Iran accord

A successful nuclear deal between the US and Iran will bring a flood of oil onto the market and the prospect has already send Brent crude prices lower
July 15, 2015

Within a few short hours of news that agreement had finally been reached over Iran's nuclear programme, hardliners in both the US Congress and the Israeli Knesset announced they were intent on undermining the deal in the coming weeks and months.

The proposals, which, if fully implemented, would eventually result in the cessation of economic sanctions against Iran, will doubtless face considerable political opposition in the region and on Capitol Hill. But Barack Obama obviously sees this as a legacy issue for his Presidency and has pledged to "veto any legislation that prevents the successful implementation of this deal".

Some of the provisions within the 109-page agreement have created immediate ructions; most notably the preservation of Iran's right to produce unlimited nuclear fuel after year 15 of the agreement. The main target of the negotiations - at least from a US perspective - was to increase the amount of time it would take Iran to make enough material for a single bomb should it abandon the accord - the so-called 'break-out' time. Critics argue that this time-lag will virtually disappear by the latter years of the agreement.

Whether this is true, who knows? But the mere possibility of rapprochement between Iran and the US has already created some rather odd bedfellows. Israel and the House of Saud have warned that the nuclear accord will further destabilise the Middle East, although they failed to expand upon whether regional stability had improved markedly as a result of their respective bombing campaigns in Gaza and Yemen.

Without wishing to sound overly pessimistic, it seems fanciful to suggest that the agreement will have much impact on the growing sectarian divide in the region, let alone relations between Tel Aviv and Tehran. But what we can say is that the lifting of sanctions on Iranian oil exports isn't likely to do any favours for Brent crude prices, which fell by over a dollar a barrel when the news broke.