Investing.com -- WTI crude futures rose sharply on Tuesday afternoon, rallying from significant losses in the morning session after Iran and a group of western powers finally agreed to terms on a comprehensive nuclear deal, following months of wrangling and delayed negotiations.
On the New York Mercantile Exchange, WTI crude for August delivery fell more than 2% to a session low of $50.90 a barrel, hours after a long-awaited completion of a deal. Texas Long Sweet futures, though, rebounded soon after, reaching an intraday high of 53.31, before settling at 52.95, up 1.45% on the session. Despite falling approximately 14% in recent weeks partly in anticipation of a deal, WTI crude futures have not dipped below $50 a barrel since early-April.
In many ways, the rally in WTI crude on Tuesday afternoon was largely unexpected. A nuclear deal has been viewed by many industry experts as bearish for crude, as Iran reportedly hoards 30 million barrels of crude in its reserves ready for export. In April, for instance, crude futures plunged more than 4%, hours after the two sides agreed on a framework for a more extensive deal.
Over the last several years, crippling economic sanctions have limited Iranian exports to approximately a million barrels of crude per day. Last month, however, Mehdi Asali, the Iranian representative to Opec, told the Iranian News Agency that the nation's crude exports could double within six months of the lifting of sanctions. An outflow of Iranian oil could depress crude prices in a market already saturated by a glut of oversupply.
When Opec decided to keep its production ceiling above its current level of 30 million barrels per day at its June meeting, Iran oil minister Bijan Namdar Zanganeh expressed dissatisfaction with the price of crude at a level near $60 a barrel. At the same time, Zanganeh said a majority of Opec members were happy with crude at a level closer to $75. In May, Iran produced 2.8 million barrels of crude per day, a level higher than that of Venezuela or Nigeria, Bloomberg reported.
It could still be awhile before a surge of Iranian exports flow into the global markets. As soon as the U.S. Congress receives a submission of the accord, it will begin an intensive 60-day review period, Sen. Bob Corker (R, Tennessee) said in a statement. The period could be extended by an additional 12 days if the Senate and House of Representatives decide to submit a joint resolution to the White House. Additionally, Congress could be given 10 further days to override a potential veto.
On the Intercontinental Exchange (ICE), the rally among brent crude futures was more restrained. Brent crude for September delivery reached a session-high of $58.95 a barrel, before settling at 58.63, up 0.84% on the session. The spread between international and U.S. benchmarks of crude stood at 5.68, below Monday's level of 5.97.
Elsewhere, investors await the release of the American Petroleum Institute's weekly report on U.S. crude inventories after Tuesday's close. On Wednesday, a government report from the U.S. Energy Information Administration (EIA) could show that crude stockpiles fell by 2.1 million barrels for the week ending on July 10.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell 0.13% to 96.80.
Dollar-denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates.