Nuclear deal pushes oil prices down
OIL prices hit the skids yesterday after Iran and six world powers sealed a deal curbing its nuclear programme, a fillip for global economic growth that found expression in heartier share prices from Tokyo to Seoul.
The agreement gives Iran some relief from crippling sanctions and is considered a big step towards a more lasting treaty.
While Iran will not be allowed to increase its oil sales for six months, any easing of Middle East tensions tends to lead to lower crude prices.
Brent crude, a benchmark for world oil prices, shed over US$2 (S$2.50) a barrel, its biggest drop for more than three weeks, to trade around US$108.70 (S$136.10).
If sustained, the drop would be a net plus for spending power globally, given that high petrol prices essentially act like a tax on consumers.
"Positive growth signals continue to trickle out across the global economy and there is growth convergence between developed and developing economies," said Mr Peter Dragicevich, a strategist at CBA.
"Our world GDP 'nowcasting' estimate points to accelerating global economic growth in the final months of 2013. This is the general trend we expect to occur in early 2014."
Mr Norman Chan, the Hong Kong-based head of investment at Calibre Asset Management, said by phone yesterday that the Iran deal "is obviously positive and hopefully we can have lower geopolitical risk".
"It helps sentiment and growth assets such as stocks. We're hoping to see oil prices drop to a new low," he said.
Oil exports from Iran will be held at about one million barrels a day under sanctions that remain in force after the nation and six world powers came to an agreement in Geneva, according to the White House.
The measures deprived the country of more than US$80 billion in revenue by cutting Iranian crude sales by 60 per cent since the start of last year, United States President Barack Obama's administration said in a statement.
Gold lost as much as 1.5 per cent to US$1,225.55 an ounce following last week's 3.6 per cent decline, the steepest weekly slump since September. Silver slid 1.3 per cent and reached the lowest price since Aug 8.