(Reuters) – Brent futures fell 5 percent, its most in a month, on Monday as speculation of a nuclear deal that could lift Iran’s sanctions and boost its oil exports brought worries about high supplies back to the market.
Rising Libyan crude output and a firmer dollar also weighed on Brent.
U.S. crude futures also fell but only slightly, supported by data suggesting a smaller-than-expected build last week in the Cushing, Oklahoma delivery point for oil.
Players were also betting the spread between the two oils would narrow after Brent’s premium to U.S. crude hit a 13-month high on Friday, market sources said.
“I think we’ve been subjected to a reality check after the fake rallies of last week,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York. “The reality is there’s a huge surplus of oil not only in the United States, but also globally, and it’s growing.”
Brent’s front-month LCOc1 fell below the psychological $60-a-barrel support, closing down $3.04 at $59.54, after talk of a sooner-than-expected nuclear deal for Tehran. Brent rose 4 percent last week to finish February up 18 percent.
Monday’s tumble came after Iranian Foreign Minister Mohammad Javad Zarif said a deal on Iran’s nuclear program could be concluded this week if the United States and other Western countries had sufficient political will and were agreeable to removing sanctions.
Iranian oil exports have been restricted for several years now by U.S. and European sanctions, although Tehran says its nuclear plans are peaceful.
Analysts believe Iran will be able to boost its oil sales fairly quickly without the restrictions, raising exports by up to 1 million barrels per day (bpd). A Reuters survey last week showed Iran pumped a total of around 2.8 million bpd in February.
Brent futures were also pressured by data showing Libya’s output had grown to above 400,000 barrels per day from 363,000 bpd in January. The dollar’s rise to an 11-year high .DXY had weighed on greenback-denominated commodities as well. [USD/]