LONDON – Oil fell on Wednesday on growing hopes of a deal between Iran and the U.N. nuclear watchdog, and the euro slumped to its lowest against the dollar in almost two years.
“The Iran agreement is certainly a positive step and is likely to result in continued relaxation of the Iran fear premium,” said Kyle Cooper, director of commodities research at IAF Advisors in Houston. “Europe is still a big concern.”
It’s the first time since June 2007 that the IAEA and Iran have agreed on methods to give inspectors greater access to facilities including Parchin, where work may have taken place on the trigger for a nuclear weapon, according to the agency.
The deal came a day before talks are scheduled to begin Wednesday between Iran and six world powers. The U.S. and Europe have imposed sanctions against Iran that are restricting its oil exports and have threatened to tighten them in the coming weeks.
Several major customers of Iranian crude including India, Japan and Turkey have said they would reduce imports on Iranian oil, while a European Union crude embargo on Tehran is due to be fully implemented from July 1.
U.S. crude oil inventories rose 1.5 million barrels last week, industry group the American Petroleum Institute said in a report released late on Tuesday.
Gasoline stocks fell 4.5 million barrels and distillate stocks fell 235,000 barrels, the API said.
Europe and the economy
A top economist for the Organization for Economic Cooperation and Development warned Tuesday that the eurozone could fall into recession this year if leaders fail to stimulate the economy.
If that happens, it would stunt growth in world oil demand at a time when supplies are expanding.
Fears that Greece may have to leave the euro grew after Dow Jones earlier quoted former prime minister Lucas Papademos as saying Greece had no choice but to stick with a painful austerity programme or face a damaging exit from the euro zone.
The euro dipped to around $1.2643 earlier, very close to last week’s four-month trough of $1.2642, and not far from a 2012 low of $1.2624 set in January. A drop below the January low would take the euro to its lowest level since August 2010.