[NEW YORK] Oil prices sank on Wednesday as traders priced in the impact on global oversupply from Iran's historic nuclear deal with major powers.
The market was also pushed lower by the rebounding dollar, given a boost by Federal Reserve Chair Janet Yellen's remarks indicating the US central bank's first interest rate hike since 2006 was still seen this year.
US benchmark West Texas Intermediate for August tumbled US$1.63 to US$51.41 a barrel.
Brent North Sea crude for delivery in August, the global benchmark, dropped to US$56.86 a barrel, down US$1.65 from Tuesday's settlement.
"The world is still trying to grips with what the nuclear deal with Iran means, and when the crude will come in the market," said James Williams of WTRG Economics. "The reality of this is setting in. " On Tuesday, Iran and six major world powers reached a deal to monitor Tehran's nuclear programme that will lead to a lifting of sanctions which have restricted the country's oil exports.
According to energy data provider Platts, Iran is exporting about 1 million barrels per day of crude, down from 2.2-2.3 million barrels a day before the sanctions were imposed in mid-2012.
"Further assessment of the Iranian nuclear deal... is quickly reaching a fairly strong consensus that the added supply will increase and prolong the current surplus, even though the recovery in Iranian production may be slower and less dramatic than had been widely appreciated," said Tim Evans of Citi Futures.
Meanwhile, Fawad Razaqzada at trading site Forex.com noted that crude prices were "held back by a rallying US dollar after Janet Yellen's hawkish remarks increased the possibility of a 2015 hike."
A stronger US unit makes dollar-priced crude more expensive for buyers using weaker currencies.
The US Department of Energy reported Wednesday that commercial crude reserves tumbled by 4.3 million barrels in the week ending July 10, to 461.4 million barrels, still near a record high.
The decline in crude inventories was more than double market expectations, "but failed to provide any support to crude oil prices," said Sucden analyst Myrto Sokou.