Oil prices drop sharply after Iran nuclear deal

The price of oil dropped to near $93 a barrel on yesterday as a deal between Iran and six world powers on the country's nuclear program made it more likely that sanctions choking Iranian oil exports will be lifted.

By early afternoon in Europe, benchmark US crude for January delivery was down $1.44 at $93.40 on the New York Mercantile Exchange. On Friday, the contract fell 60 cents to close at $94.84.

Brent crude, a benchmark for international oil, was down $1.92 at $109.13 a barrel on the ICE Futures exchange in London.

After marathon negotiations in Geneva, Iran on Sunday reached an agreement with the US, Britain, France, Russia, China and Germany to limit enrichment of uranium to 5 percent, far below the level needed for nuclear weapons.

Iran got limited relief from sanctions that have hobbled its economy, but an embargo on its oil exports remains in place while negotiations continue for a more enduring deal to ensure that the country only uses nuclear technology for peaceful purposes such as power generation.

If Iranian oil returns to international markets, the additional supply is likely to make crude less expensive.

"With new (US) domestic output capacity coming on line, plus the potential reemergence of Iranian barrels coming onto the global market, the table is set for lower prices over the longer term," energy analyst Stephen Schork said in a market commentary.

For now, analysts expect Iran's oil exports to remain at around 1 million barrels a day, with most of the flow soaked up by Asian countries like China, India and Korea. That is still far below the 2.5 million barrels a day Iran was exporting in 2011, before sanctions began.

"Iran is still a long way from resuming full oil exports, but the prospect is already being priced in the market," analysts noted in the Kilduff Report edited by Michael Fitzpatrick.

The Nymex crude contract is down from about $104 in early October because of ample supplies and muted demand.

In other energy futures trading on Nymex:

— Wholesale gasoline dropped 4.17 cents to $2.6694 gallon.

— Heating oil shed 4.77 cents to $2.9916 a gallon.

— Natural gas added 5.1 cents to $3.819 per 1,000 cubic feet.