Oil Declines On Iranian Nuclear Deal

The United States and Iran have been negotiating for nearly two years now. Finally, it seems as though the two countries have come to an agreement. However, the lengthy negotiations coming to an end has a bitter sweet connotation. While this is great news on the political side of the fence, on the financial side of the fence, particularly in the oil market, the deal could be a cause for major concern. Today, we'll talk about the deal that the United States and Iran came to, how it's likely to affect the oil market and how you can benefit from the event.

The United States And Iran Have Come To An Agreement

As mentioned above, the United States and Iran have been in the midst of negotiations for nearly two years. The negotiations revolved around Iran's ability to develop enriched uranium; an element needed to create nuclear weaponry. As a result of Iran's involvement in the creation of nuclear weaponry, the United States placed sanctions on the country until the problem was resolved. However, it seems as though a resolution has been made.

The negotiations yielded an agreement that includes the following…

• Iran will reduce its number of centrifuges by two thirds.
• Bans will be placed on key nuclear enrichment facilities.
• Uranium research and development will be limited to the Natanz facility.
• Uranium enrichment will be capped at 3.67% and the stockpile of enriched uranium will be limited to 300kg for 15 years.
• Iran will also ship spent fuel out of the country as well as provide access for IAEA inspectors.
• The United States will lift sanctions placed against Iran.

How This Is Likely To Affect The Oil Market

A key factor to keep in mind here is the fact that while Iran has one of the worlds largest oil stockpiles, their oil hasn't been able to reach world markets because of sanctions. So, although we are experiencing a supply glut, that glut has nothing to do with Iran…yet! As a result of the sanctions being lifted, Iranian oil will finally be able to reach the world markets. This is likely to turn the supply glut issue into a crisis.

While it will take time for Iran to ramp up oil production, it's not going to take much time. In fact, experts are expecting that the country will be producing 500,000 barrels of oil per day by the end of the year. They're also expecting that at its peak in 2016, Iran will contribute 1 million barrels of oil per day to the world market; a market that's already producing 2 million more barrels per day than it is using!

The Oil Market Has Already Started To React

Although Iran will take time to ramp up production, the inevitable supply increase is already starting to hit the value of the commodity. On Wednesday, the value of oil settled at $51.31 per barrel; down more than 3%. Experts are expecting this reaction to continue. Some are even calling for $2 per gallon gas prices in the United States as a result of the impending collapse in the value of the commodity.

How To Gain From The Trends

While the value of oil may be falling, that doesn't mean that you can't see gains from the commodity. Waiting for the price to reach resistance and riding the trend down with put options may just be your key to profits!