Oil prices drop after Opec refuses to cut output

If the six global powers reach deal and lift sanctions on Iran, it will trigger a downward movement of crude.

SINGAPORE: Oil prices fell in Asia today after Opec decided to maintain its high output levels, while traders were also weighing the possible return of Iranian supplies that have been curtailed by international sanctions against Tehran, analysts said.

US benchmark West Texas Intermediate for July delivery fell 59 cents to US$58.54 while Brent crude for July eased 56 cents to US$62.75 in mid-morning trade.

Analysts said investors were mulling the long-term impact on prices after the 12-nation Organisation of the Petroleum Exporting Countries (OPec) on Friday defied calls to cut output to alleviate a global supply glut that has seen prices slump almost 50% over the past year.

Instead, they kept their collective target at 30 million barrels per day – where it has stood for more than three and a half years.

Opec countries are reported to be actually pumping more than 31 million barrels a day, with the risk of more coming on line.

Sanjeev Gupta, head of the Asia-Pacific oil and gas practice at business consultancy firm EY, said prices are “likely to remain volatile” ahead of a June 30 deadline for Iran and world powers to come to an agreement on curbing Tehran’s nuclear programme.

Six global powers – Britain, China, France, Germany, Russia and the United States – are trying to nail down a deal to curb Iran’s nuclear ambitions by reducing its stockpiles of enriched uranium and mothballing some of its sites.

If the agreement is reached and implemented, the powers have agreed to gradually scale back sanctions imposed since 2012, including on its petroleum industry.

Iran has the world’s fourth-largest oil reserves but its exports have fallen from more than 2.2 million barrels per day in 2011 to about 1.3 million because of the sanctions.

“Any likelihood of a deal could act as a trigger for downward movement of crude prices,” said Gupta.

– AFP