Oil prices retreat slightly

26th November 2013, Comments 0 comments

World oil prices fell on Tuesday as traders weighed up the impact on supplies of Iran's nuclear deal and unrest in Libya, both members of the OPEC producers cartel.

New York's main contract, West Texas Intermediate (WTI) for delivery in January fell 31 cents to $93.78 a barrel.

Brent North Sea crude for January slipped 19 cents to stand at $110.81 a barrel in late London deals.

Crude futures dropped after a volatile day's trading on Monday, which saw oil retreat steeply in reaction to Sunday's Iran deal before paring losses as scepticism set in over the accord's details.

The agreement, seen as boosting crude supplies, saw major world powers and Iran agree to some modest sanctions relief in exchange for tighter oversight of the Islamic republic's nuclear programme.

"The initial knee-jerk sell off came with the easing of the build-up in geopolitical risk premium," Desmond Chua, analyst at traders CMC Markets said Tuesday.

"Nonetheless,the decline was short-lived as traders understood that the deal will not see a glut of oil supply."

The deal agreed in Geneva between Iran and the so-called P5+1 nations -- the United States, China, France, Britain, Russia and Germany -- will deliver about $7 billion (5.17 billion euros) in relief to Iran, according to US estimates, and will stand for six months while a more long-lasting solution is negotiated.

It includes giving Iran very limited access to its income from oil and other sales, frozen in banks overseas, to be used for humanitarian purposes. While the deal protects the country's oil exports at current levels, it does not allow for further growth.

Iran has been crippled by a series of UN and US sanctions aimed at bringing an end to its nuclear drive, which the West claims is being used to develop atomic weapons. Iran denies the assertion.

"The deal did not include any easing of sanctions on Tehran's crude oil exports," said Fawad Razaqzada, analyst at traders Gain Capital.

"This means that, all else remaining equal, there won't be any further increase in the global supply of oil until at least six months from now when a longer-term agreement may be reached."

He added Tuesday: "Indeed, geopolitical risks across the Middle East and North Africa regions are still there."

In oil producer Libya, shops and schools closed across the city of Benghazi on Tuesday as residents responded to calls for civil disobedience to protest deadly clashes between radical Islamists and the army.

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© 2013 AFP

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