REUTERS
The signing of an agreement with Iran on its nuclear program, which may bring about an easing of sanctions against the country and a growth in its oil exports, is expected to contribute further to oil price decrease, according to oil traders.
In global trading on Friday, March 27, oil prices fell by more than $1 a barrel following a sharp rise on the previous day, as investors fretted that Saudi airstrikes in Yemen would cause supply disruptions, Reuters reports.
Futures for Brent decreased by $1.18 to $58.01 a barrel, while futures for WTI were down by $1.03 to $50.40.
On Thursday, oil prices increased by 5% on the announcement about the start of military operations by a coalition of Arab states led by Saudi Arabia against Shia Houthis in Yemen. The rise in prices was caused by fears that the fighting would affect shipping in the Bab el-Mandeb Strait, through which on average 3.8 million barrels of crude oil and petroleum products are transported daily.
Prices may rise if fighting escalates into a regional conflict involving Islamists, but Bab-el-Mandeb - the entrance to the Red Sea - is unlikely to be closed to shipping, experts say.
If this does happen, tankers will have to choose a much longer route around Africa. Meanwhile, Goldman Sachs analysts say the situation in Yemen will not have a noticeable effect on the supply of oil, as the volume of exports from the country is insignificant, and tankers can sail to bypass the territorial waters of Yemen. Last year, Yemen was producing on average 145,000 barrels per day.
Reaching agreement with Iran on its nuclear program will be of much more importance to the market, as it could be followed by an easing of sanctions against Iran and an increase in its oil exports, analysts from ANZ bank said.