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Oil Loses Risk Premium as Iran Negotiates

November 25, 2013 at 10:56 by Vladimir Vyun

Crude oil sank today on signs that agreement can be reached regarding the Iranian nuclear program. Iran and world powers reached a temporary deal to limit the Middle Eastern country’s nuclear activity in exchange for relief from sanctions against nation’s exports. Iranian Foreign Minister Mohammad Javad Zarif said that Iran is ready to start fulfilling the agreement:

In the coming weeks — by the end of the Christian year — we will begin the programme for the first phase. At the same time, we are prepared to begin negotiations for a final resolution as of tomorrow.

Israel and some of US politicians were against the deal. Nevertheless, the agreement brought hope for improvement of relations between Iran and other countries. This removed risk premium for crude oil, resulting in the sharp drop of prices.

Futures for delivery of WTI grade of crude oil in January sank $1.40 (1.48 percent) to $93.44 per barrel as of 10:52 GMT on NYMEX today. Contract for Brent grade lost as much as $2.21 (1.99 percent) to $108.84 per barrel on ICE.

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