Investing.com -- Crude fell more than 5% on Friday slipping below $29 a barrel, as investors braced for Iran's return to global energy markets ahead of the release of a report that could pave the way for a group of Western powers to ease longstanding economic sanctions against the Persian Gulf state.
With the sharp losses, the international and U.S. benchmarks of crude both plunged to fresh 12-year lows, extending a massive downturn that has persisted over the last 19 months. On the New York Mercantile Exchange, WTI crude for February delivery traded between $29.15 and $31.22 a barrel before settling at $29.44, down 1.76 or 5.66% on the session. Since closing 2015 around $37, Texas light, sweet futures have plummeted more than 21%.
On the Intercontinental Exchange (ICE), brent crude for March delivery wavered between $28.86 and $31.16 a barrel, before closing at $28.95, down 1.93 or 6.23% on the day. The sell-off erased all of the gains from the previous trading day when North Sea brent futures ended a nine-day losing skid with its first winning session of the new year. On Friday, brent futures fell to its lowest level since July, 2004.
A report from the International Atomic Energy Agency (IAEA) which could confirm that Iran has met the requirements of a historic nuclear deal reached last summer is expected to come out on Saturday, sources told Reuters. Iran foreign minister Mohammad Javad Zarif and European Commission vice president Federica Mogherini are also expected to issue a statement over the weekend, Reuters reported, which could include a timetable for sanction relief.
Meanwhile, Iran has nearly two dozen large crude carriers floating off its coast ready for delivery as soon as the sanctions are lifted, according to multiple reports. The tankers could be headed to India, where oil is in high demand in its rapidly expanding market. Iran expects to boost oil exports by 500,000 barrels per day when sanctions are initially eased, 200,000 bpd of which could be delivered to India.
The surge in Iranian exports is viewed as bearish for crude, which has fallen approximately 75% from its peak of $115 two summers ago, amid a glut of oversupply on markets worldwide. Crude ended last year down more than 30%, after OPEC triggered a prolonged battle with U.S. shale producers for market share by keeping its production ceiling above 30 million bpd in an unforeseen move in November, 2014.
Elsewhere, investors reacted to a slight drop in U.S. oil rigs last week as production remained relatively high, above 9.2 million barrels on the week. Oil services firm Baker Hughes said Friday that U.S. oil rigs fell by one to 515 for the week ending on January 8, marking the fourth consecutive week of weekly draws. The rig total, which has declined in eight of the last nine weeks, has fallen sharply from its level 14 months ago, when it hovered around 1,600.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, lost more than 0.40% to an intraday low of 98.42. The index remains near 12-month highs from December, when it eclipsed 100.00.
Dollar-denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates.